<PAGE>






                        CONFIDENTIAL TREATMENT REQUESTED


Confidential portions of this document have been redacted and have been
separately filed with the Commission.


<PAGE>


                     AGREEMENT FOR PURCHASE AND SALE OF COAL
                          AMONG GEORGIA POWER COMPANY,
           JAMES RIVER COAL COMPANY. AND JAMES RIVER COAL SALES. INC.

                                TABLE OF CONTENTS
                                                                            Page
Section 1:  Definitions........................................................4
Section 2:  General Provisions.................................................5
            2.1  Mutual Obligations............................................5
            2.2  Prior Agreement...............................................5
            2.3  Agent for PURCHASER...........................................5
            2.4  SELLER's Warranties as to Coal Property.......................5
            2.5  SELLER's Mining Plans.........................................6
            2.6  Quantities Supplied under Separate Agreements.................7
Section 3:  Term of Agreement..................................................8
Section 4:  Base Price and Adjustments.........................................8
            4.1  Base Price....................................................8
            4.2  Price Adjustments.............................................8
            4.3  Adjustments for Changes in Governmental Impositions...........8
            4.4  Calorific Value Adjustments..................................10
            4.5  Excess Ash Adjustments.......................................11
            4.6  Grindability Adjustments.....................................11
            4.7  Excess Sulfur Adjustments....................................12
            4.8  Calculation of Adjustments...................................13
Section 5:  Price Reviews.....................................................13
            5.1  General Provisions for Price Reviews.........................13
            5.2  * * *1.......................................................15
            5.3  * * *1.......................................................16
Section 6:  Quantity Requirements.............................................16
            6.1  Base Tonnage.................................................16
            6.2  Quarterly Amount.............................................16
            6.3  Reductions in Base Tonnage and Quarterly Amount..............16
            6.4  Shortfalls in Shipments......................................17
Section 7:  Quality Requirements..............................................20
            7.1  Coal Specifications..........................................20
            7.2  Reimbursement for Equipment Damage...........................21
            7.3  Rejection of Shipments.......................................21

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                                      -i-

<PAGE>

            7.4  Suspension and Termination for Quality Variations............22
            7.5  Cancellation and Termination.................................23
            7.6  Costs Related to Termination.................................23
            7.7  Replacement Coal.............................................24
Section 8:  Weighing and Sampling.............................................24
            8.1  Weighing of Shipments........................................24
            8.2  Collection and Preparation of Samples........................26
            8.3  Analysis of Samples..........................................27
Section 9:  Arrangements for Shipments and Payments...........................28
            9.1  Scheduling of Shipments......................................28
            9.2  Loading of Shipments.........................................28
            9.3  Shipping Notices.............................................29
            9.4  "As Loaded" Coal Quality Analysis............................29
            9.5  Freight Charges, Risk of Loss, and Passage of Title..........30
            9.6  Loading Costs Chargeable to SELLER...........................30
            9.7  Excess Freight Costs Chargeable to SELLER....................30
            9.8  Payment of Amount(s) Owed to PURCHASER.......................30
            9.9  Invoices and Interim Payments................................30
            9.10  Application of Adjustments to Billing Price.................31
            9.11  Acceptance of Payments......................................31
Section 10:  Termination of Agreement for Unremedied Default..................31
            10.1  Notice of Termination.......................................31
            10.2  Option to Forego Termination................................31
Section 11:  Excuse from Performance..........................................31
            11.1  Force Majeure...............................................31
            11.2  Changes in Environmental-Related Requirements...............33
Section 12:  Independent Contractor...........................................35
Section 13:  Effect of Certain Terminations...................................35
Section 14:  Binding Effect and Assignments...................................36
            14.1  Binding Effect..............................................36
            14.2  Assignments.................................................36
Section 15:  PURCHASER's Rights of Inspection.................................36
            15.1  Access to SELLER's Records..................................36
            15.2  Access to Coal Property.....................................36
Section 16:  Waiver...........................................................37
Section 17:  Remedies.........................................................37
Section 18:  Notices..........................................................37

                                      -ii-
<PAGE>

Section 19:  Confidential and Proprietary Information.........................37
Section 20:  Compliance with Laws and Regulations.............................38
Section 21:  Other Provisions.................................................38
            21.1  Captions....................................................38
            21.2  Governing Law...............................................38
            21.3  Time of Essence.............................................38
            21.4  Entire Agreement............................................38
            21.5  Amendments..................................................38
            21.6  Multiple Counterparts.......................................38


Annex A - Maps of Coal Property
Annex B - Computation of Calorific Value Adjustments
Annex C - Computation of Excess Ash Adjustments
Annex D - Computation of Grindability Adjustments
Annex E - Computation of Excess Sulfur Adjustments
Annex F - Computation of Rejection Adjustments
Annex G - Coal Sample Preparation and Analysis Procedures
Annex N - Summary of Rail Contract Provisions
Annex I - Laws and Regulations



                                     -iii-

<PAGE>

                     AGREEMENT FOR PURCHASE AND SALE OF COAL

        This AGREEMENT FOR PURCHASE AND SALE OF COAL ("Agreement") is entered
into as of March 11, 2004 ("Effective Date"), among Georgia Power Company, a
Georgia corporation ("PURCHASER"), James River Coal Company, a Virginia
corporation ("SELLER"), and James River Coal Sales, Inc., a Delaware corporation
("SALES AGENT"). (PURCHASER, SELLER, and SALES AGENT are sometimes hereinafter
referred to collectively as the "Parties" or separately as a "Party.")

                                    RECITALS:

        WHEREAS, the Parties previously entered into that certain Amended and
Restated Agreement for Sale and Purchase of Coal dated October l, 2001, as
amended ("Prior Agreement"), which provides for SELLER to supply certain
quantities of coal to PURCHASER for use in operating PURCHASER's
electric-generating plants; and

        WHEREAS, as a result of subsequent events and negotiations, the Parties
now wish to replace the Prior Agreement with this Agreement as hereinafter
provided;

        NOW. THEREFORE, in consideration of the foregoing recitals and the
promises contained in this Agreement, the Parties hereby agree as follows:

SECTION 1: DEFINITIONS

        1n addition to other terms defined elsewhere in this Agreement, the
following definitions shall apply in this Agreement:

        1.1 "Base Price" means the price for coal that is set forth in Section
4.1(a).

        1.2 "Base Tonnage" means the quantity of coal to be supplied during each
Contract Year under this Agreement as set forth in Section 6.1.

        1.3 "Coal Property" means the real property, mineral interests,
preparation plant facilities, loading facilities, and other improvements located
in Leslie County, Knott County, Perry County, Harlan County, Pike County, Bell
County, and Letcher County, Kentucky, as outlined on the maps that are
identified as Annex A, which is attached hereto and made a pan of this
Agreement.

        1.4 "Contract Year" means each twelve-month period that begins on
January 1 and ends on December 31 during the term of this Agreement; provided,
however, that the first Contract Year may begin after January l and may consist
of less twelve months.

        1.5 "Quarter" means each three-month period that occurs during a
Contract Year. The first Quarter of each Contract Year shall begin on January l
and end on March 31; the second Quarter of each Contract Year shall begin on
April l and end on June 30; the third Quarter of each Contract Year shall begin
on July 1 and end on September 30; and the fourth Quarter of each Contract Year
shall begin on October l and end on December 31; provided, however, that (i) if
this Agreement becomes effective after January 1, 2004, and before March 31,
2004, the first Quarter of the first Contract Year may begin after January 1 and
may consist of less than three months and (ii) if this Agreement becomes
effective after April 1, 2004, and before June 30, 2004, the second Quarter of
the first Contract Year may begin after April l and may consist of less than
three months.

        1.6 "Quarterly Amount" means the quantity of coal scheduled to be
supplied by SELLER to PURCHASER during a Quarter.

                                      -4-

<PAGE>

        1.7 "Rail Contract" means that certain Rail Transportation Agreement
between PURCHASER and CSX Transportation. Inc., which applies to Shipments under
this Agreement.

        1.8 "SELLER's Loading Facility" means each of the loading facilities
that are owned or controlled by SELLER and are located at or near Hignite,
Clover, Buckeye, Leatherwood, Burke, or Bevins Branch, Kentucky.

        1.9 "Shipment" means one lot of coal, in sufficient quantities to fill a
unit train, loaded into railcars for delivery to PURCHASER.

        1.10 "Shortfall Period" means either (i) a Quarter in which the quantity
of coal actually supplied by SELLER to PURCHASER during the Quarter is less than
the Quarterly Amount or (ii) a Contract Year in which the quantity of coal
actually supplied by SELLER to PURCHASER is.less than the Base Tonnage (as
reduced where appropriate under Section 6.3).

        1.11 "Ton" or "ton" means an avoirdupois weight of 2,000 pounds.

        1.12 "Tonnage Shortfall" means, for a particular time period (whether
calendar month, Quarter. Contract Year. or other period) during the term of this
Agreement, the difference between (i) the quantity of coal scheduled to be
supplied by SELLER to PURCHASER during such time period and (ii) the quantity of
coal actually supplied by SELLER to PURCHASER during such time period.

SECTION 2: GENERAL PROVISIONS

        2.1 MUTUAL OBLIGATIONS. SELLER shall mine coal from the Coal Property
and sell such coal to PURCHASER. and PURCHASER shall buy such coal from SELLER,
on the terms and conditions set forth in this Agreement.

        2.2 PRIOR AGREEMENT. This Agreement shall supersede and replace the
Prior Agreement effective as of 11:59 p.m. Eastern Time on the Effective Date;
and the terms and conditions of the Prior Agreement shall have no force and
effect after such time, except with respect to Shipments made prior to such
time. The Parties acknowledge and agree that as of 11:59 p.m. Eastern Time on
the Effective Date, all pending issues related to the Prior Agreement (other
than amounts owed for Shipments made prior to such time) shall have been finally
settled and resolved.

        2.3 AGENT FOR PURCHASER. PURCHASER has designated Southern Company
Services, Inc., which is an affiliate of PURCHASER, to act on behalf of
PURCHASER in giving or receiving notices under this Agreement, scheduling
Shipments under this Agreement, and performing other activities related to this
Agreement as determined by PURCHASER from time to time.

        2.4 SELLER'S WARRANTIES AS TO COAL PROPERTY



                                      -5-
<PAGE>

            (a) SELLER represents and warrants that: (i) SELLER owns or controls
the Coal Property; (ii) the Coal Property contains economically recoverable coal
of a quality and in quantities that, under present mining laws and practices,
shall be sufficient to satisfy the requirements of this Agreement; (iii) during
the term of this Agreement. SELLER shall not use or sell coal from the Coal
Property in a way that shall reduce the economically recoverable balance of coal
in the Coal Property to an amount less than the quantity of coal to be supplied
under this Agreement; and (iv) all Shipments under this Agreement shall be mined
from the Coal Property.

            (b) SELLER further represents and wan-ants that SELLER shall defend
PURCHASER's title with respect to all coal sold under this Agreement and shall
indemnify PURCHASER against all claims, demands, actions, suits, liabilities,
and judgments asserted against PURCHASER by any third party with respect to such
title and all damages, costs, and expenses (including, without limitation,
reasonable attorney's fees and litigation expenses) incurred by PURCHASER in
defending such title; provided, however, that SELLER shall not be liable, except
as otherwise provided in this Agreement, for any special, indirect, or
consequential damages. costs, or expenses incurred by PURCHASER. The provisions
of this Section 2.4(b) shall survive the termination or expiration of this
Agreement.

            (c) Except for the warranties set forth in Section 2.4. SELLER makes
no other express warranties, no implied warranty of merchantability, and no
implied warranty of fitness for a particular purpose related to the coal to be
supplied under this Agreement.

        2.5 SELLER'S MINING PLANS

            (a) The Parties acknowledge that SELLER has previously provided
mining plans as required by the Prior Agreement. No later than July l, 2004,
SELLER shall prepare a new mining plan ("New Mining Plan") with respect to the
Coal Property to demonstrate SELLER's capability to produce coal from the Coal
Property that meets the quality specifications and quantity requirements of this
Agreement. The New Mining Plan shall contain maps and narratives depicting areas
and seams of coal to be mined and shall include, without limitation, the
following information: (i) reserves under the ownership or control of SELLER
from which the coal is to be produced; (ii) methods of mining such coal; (iii)
methods of transporting, washing, preparing, and blending coal from various
seams to ensure compliance with the quality specifications and quantity
requirements of this Agreement; and (iv) methods to be used in the reclamation
and rehabilitation of surface lands within the Coal Property.

            (b) Within ninety days after PURCHASER has received the New Mining
Plan, PURCHASER shall review the New Mining Plan and shall notify SELLER in
writing whether the New Mining Plan is adequate for this Agreement. If PURCHASER
determines that the New Mining Plan is not adequate. PURCHASER's notice to
SELLER pursuant to this Section 2.5(b) shall specify the aspects of the New
Mining Plan that, in PURCHASER's opinion, are inadequate. The following
provisions shall then apply:

                (1) The Parties shall promptly consult in good faith concerning
aspects of the New Mining Plan that PURCHASER has determined are inadequate.

                (2) Within thirty days after SELLER has received PURCHASER's
notice pursuant to Section 2.5(b), SELLER may submit revisions to the New Mining
Plan to correct the inadequacies identified in such notice.

                                      -6-
<PAGE>

                (3) Within sixty days after PURCHASER has received any revisions
to the New Mining Plan from SELLER, PURCHASER shall review and evaluate such
revisions and then notify SELLER in writing of PURCHASER's conclusions regarding
such revisions.

            (c) PURCHASER shall evaluate the New Mining Plan, as modified by any
revisions submitted pursuant to Section 2.5(b)(2), to determine whether it
demonstrates that SELLER has the capability to produce coal from the Coal
Property that meets the quality specifications and quantity requirements of this
Agreement. If PURCHASER determines; in its reasonable judgment, that the New
Mining Plan, as modified by any revisions submitted pursuant to Section
2.5(b)(2), fails to provide such demonstration, PURCHASER may then terminate
this Agreement by giving SELLER written notice thereof, which shall specify the
effective date of termination and shall be given at least six months prior to
such date.

            (d) After PURCHASER has accepted the New Mining Plan, as modified by
any revisions submitted pursuant to Section 2.5(b)(2), SELLER shall promptly
notify PURCHASER in writing of (i) any material variations or deviations from
the New Mining Plan and (ii) any substantial changes to the New Mining Plan or
SELLER's mining operations, coal-processing operations, or transportation
arrangements as set forth in the New Mining Plan.

            (e) PURCHASER's receipt, review, and acceptance of the New Mining
Plan and any revisions submitted pursuant to Section 2.5(b)(2) shall not in any
manner relieve SELLER of any of its duties or obligations under this Agreement;
nor shall such receipt, review, and acceptance be construed as, or deemed to be,
an approval of SELLER's proposed plans as prudent mining practices or a waiver
of PURCHASER's rights and remedies under this Agreement for SELLER's failure to
supply coal that complies with all requirements of this Agreement.

        2.6 QUANTITIES SUPPLIED UNDER SEPARATE AGREEMENTS. The Parties
acknowledge that after the execution of this Agreement, (i) The C. Reiss Coal
Company ("CRCC"), SELLER, and SALES AGENT may enter into an agreement for coal
to be supplied from the Coal Property as feedstock for a synthetic fuel plant
installed at Plant Branch near Milledgeville, Georgia ("CRCC Agreement") and
(ii) DTE Clover, LLC ("DTE") and SELLER may enter into an agreement for coal to
be supplied from the Coal Property as feedstock for a synthetic fuel plant
installed at the Clover Loading Facility near Bledsoe, Kentucky ("DTE
Agreement"). The Parties agree that the quantities of coal supplied by SELLER to
PURCHASER under this Agreement during the first Contract Year through the third
Contract Year (2004 through 2006) shall be reduced by the quantities of coal, if
any, actually supplied, during each Contract Year involved, by SELLER to CRCC
under the CRCC Agreement ("CRCC Quantities") and to DTE under the DTE Agreement
("DTE Quantities"). With respect to the CRCC Quantities, if any, and the DTE
Quantities, if any, the Parties further acknowledge as follows: (i) SELLER is
released from its obligation to sell to PURCHASER, and PURCHASER is released
from its obligation to buy from SELLER, all portions of the CRCC Quantities and
all portions of the DTE Quantities; (ii) PURCHASER has provided no assurances
regarding the quantities of coal that may be supplied to CRCC under the CRCC
Agreement or to DTE under the DTE Agreement; and (iii) PURCHASER shall .have no
liability to SELLER or SALES AGENT regarding sums owed by CRCC to SELLER or
SALES AGENT for the CRCC Quantities or by DTE to SELLER or SALES AGENT for the
DTE Quantities.


                                      -7-
<PAGE>

SECTION 3: TERM OF AGREEMENT

        The term of this Agreement shall commence at 11:59 p.m. on the Effective
Date and shall continue in full force and effect through December 31, 2006,
unless earlier terminated as provided in this Agreement. Shipments under this
Agreement shall begin within two days after the Effective Date.

SECTION 4: BASE PRICE AND ADJUSTMENTS

        4.1 BASE PRICE

            (a) The Base Price as of the Effective Date, is * * *2 f.o.b.
railcar at SELLER's Loading Facility (whether located at Hignite, Clover,
Buckeye, Leatherwood, Burke, or Bevins Branch, Kentucky), which shall remain
firm through * * *2, unless adjusted pursuant to Section 4.3.

            (b) The Base Price set forth in Section 4.1(a) includes, without
limitation, all costs for mining, processing, marketing, or quality control work
necessary to satisfy the requirements of this Agreement.

            (c) For each of SELLER's Loading Facilities, PURCHASER shall
promptly issue to SELLER a purchase order reflecting the Base Price for
Shipments from such loading facility; and from time to time thereafter.
PURCHASER shall issue change orders to such purchase order(s) to reflect
adjustments where appropriate, to the Base Price. Such purchase order(s) and
change orders are for administrative and accounting purposes only and shall not
constitute, nor be deemed to result in, any amendment, change, or modification
of the terms and conditions of this Agreement.

        4.2 PRICE ADJUSTMENTS

            (a) The Base Price shall be adjusted, when appropriate, as provided
in Sections 4.2 and 4.3. The Base Price, with any adjustments pursuant to
Sections 4.2 and 4.3, shall be referred to as the "Adjusted Base Price."

            (b) Effective as of * * *2, the Base Price shall be adjusted to * *
*2 per ton f.o.b. railcar at SELLER's Loading Facility (whether located at
Hignite, Clover, Buckeye, Leatherwood, Burke, or Bevins Branch, Kentucky), which
shall remain firm through * * *2, unless further adjusted pursuant to Section
4.3.

            (c) Effective as of * * *2, the Base Price shall be adjusted to * *
*2 per ton f.o.b. railcar at SELLER's Loading Facility (whether located at
Hignite, Clover, Buckeye, Leatherwood, Burke, or Bevins Branch, Kentucky), which
shall remain firm through * * *2, unless further adjusted pursuant to Section
4.3.

            (d) The Base Price or the Adjusted Base Price, as the case may be,
that applies to each Shipment shall be referred to as the "Billing Price" for
such Shipment. The Billing Price for each Shipment shall be subject to the
provisions of Sections 4.4 (calorific value adjustments), 4.5 (excess ash
adjustments), 4.6 (grindability adjustments), and 4.7 (excess sulfur
adjustments).

            (e) All calculations of adjustments to the Base Price, the Adjusted
Base Price, or the Billing Price shall be carried to six decimal places and then
rounded to four decimal places. No dispute concerning such adjustments shall in
any way relieve any Party of its respective obligations of performance under
this Agreement until such dispute is resolved.

        4.3 ADJUSTMENTS FOR CHANGES IN GOVERNMENTAL IMPOSITIONS

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                                      -8-

<PAGE>

            (a) As used in this Agreement, the term "Governmental Imposition,"
whether in the singular or the plural, means taxes, fees, or obligations imposed
on SELLER by any government or governmental agency, and resulting costs or
savings, pursuant to a law or regulation that directly affects the production,
mining, or loading of coal from the Coal Property. Governmental Impositions
include taxes levied by a political subdivision. severance taxes on coal, and
special fund assessments related to worker's compensation; but Governmental
Impositions do not include (for the purpose of illustration and not limitation)
any of the following: ad valorem taxes on land or improvements, unmined mineral
taxes. assessments or premiums related to employee retirement or health benefits
or similar employee welfare benefits (other than worker's compensation), costs
incurred to comply with orders or decrees revoking SELLER's self-insurance
privileges, or sales or use taxes (even if imposed on materials and supplies
used in the production of coal under this Agreement).

            (b) The Base Price set forth in Section 4.1 (a) includes all costs
of compliance by SELLER as of January 1, 2004, with all presently applicable
taxes, fees, and costs of compliance with any surface or underground mine
regulatory statutes and administrative regulations and rulings in effect as of
January 1, 2004. The Base Price set forth in Section 4.1(a) also includes all
costs of compliance with the Federal Surface Mining Control and Reclamation Act
of 1977, as amended ("Act"), applicable to the mine or mines that SELLER
currently operates or may develop on the Coal Property, including (without
limitation) all costs associated with the following: (i) environmental
protection performance standards under Sections 515 and 516 of the Act; (ii)
inspection and monitoring by state or federal regulatory authorities; (iii)
obtaining permits; and (iv) any performance bond that may be required under the
Act. No price adjustment shall be made under any provision of Section 4.3 for
costs associated with any presently applicable tax, fee, statute, regulation, or
the like that was in effect as of January l, 2004, or was known as of January 1,
2004 (but not effective until thereafter) or that is expressly included in the
Base Price as stated above in this Section 4.3(b), regardless of whether the
Base Price fully reflected such costs.

            (c) To the extent not prohibited by or inconsistent with other
provisions of Section 4.3, price adjustments shall be made for changes in
Governmental Impositions that directly affect coal actually mined for delivery
to PURCHASER under this Agreement and result from the following: (i) amendments
after January 1, 2004, to presently applicable statutes or administrative
regulations or rulings; (ii) requirements of entirely new statutes or
administrative regulations or rulings that are enacted or promulgated after
January 1, 2004; or (iii) final judgments, orders, or decrees issued by any
court that reflect new and different interpretations of law; provided, however,
that no price adjustment shall be made for changes in Governmental Impositions
that result from the following: (x) any civil or criminal fine or penalty
imposed as the result of SELLER's failure to comply with any statute,
administrative regulation or ruling, or judgment, order, or decree of any court
(unless PURCHASER shall have specifically authorized in writing the incurring of
such fine or penalty); or (y) any change in the millage rate or valuation of
property for purposes of assessing any existing ad valorem tax or unmined
mineral tax.

            (d) In the event that after January 1, 2004, any change in a statute
or administrative regulation or ruling imposes a new Governmental Imposition or
removes, increases, or decreases an existing Governmental Imposition, SELLER
shall promptly give PURCHASER written notice thereof and shall specify the
amount and effective date of any claimed adjustment to the Base Price or
Adjusted Base Price, as the case may be. that results

                                      -9-
<PAGE>

from such change. In addition. such notice shall contain sufficient
documentation and data to enable PURCHASER to review and quantify the effect of
such change on SELLER's costs and to substantiate the amount of the claimed
adjustment. Within sixty days after PURCHASER has received the notice from
SELLER as required by this Section 4.3(d), the Parties shall jointly estimate
and attempt to agree on the costs or savings resulting from such new
Governmental Imposition or such removal, increase, or decrease in an existing
Governmental Imposition during the remaining term of this Agreement. If the
Parties agree on the amount of such costs or savings. the Base Price or the
Adjusted Base Price, as the case may be, shall be further adjusted to reflect
100% of the amount of such costs or savings. PURCHASER shall have the right, but
not the obligation, to give SELLER written notice of any such change and to seek
an adjustment pursuant to this Section 4.3(d).

            (e) Any adjustment pursuant to Section 4.3(d) that results in an
increase to the Base Price or the Adjusted Base Price, as the case may be, shall
become effective on the later of the following: (i) the date on which the change
in Governmental Impositions takes effect; or (ii) the date on which PURCHASER
received the written notice from SELLER as required by Section 4.3(d). Any
adjustment pursuant to Section 4.3(d) that results in a decrease in the Base
Price or the Adjusted Base Price, as the case may be, shall become effective on
the date on which the change in Governmental Impositions takes effect.

            (f) Notwithstanding the provisions of Sections 4.2(e) and 4.3(d),
PURCHASER may terminate this Agreement in the following events: (i) a claimed
adjustment pursuant to Section 4.3(d), together with any prior adjustments
pursuant to Section 4.3(d), would make the then-current Billing Price for
Shipments under this Agreement 10% or more greater than the Base Price set forth
in Section 4.1(a); and (ii) the Parties cannot reach agreement on a new Billing
Price to implement the claimed adjustment pursuant to Section 4.3(d). If
PURCHASER exercises its right of termination under this Section 4.3(f),
PURCHASER shall give SELLER written notice thereof, which shall specify the
effective date of termination and shall be given at least ninety days prior to
such date.

        4.4 CALORIFIC VALUE ADJUSTMENTS

            (a) The amount to be paid for Shipments under each purchase order
issued by PURCHASER with respect to this Agreement shall be adjusted on a
monthly basis according to the actual monthly weighted average "as received"
calorific value (hereinafter referred to as "MWACV") of such Shipments, as
determined from samples collected and analyzed in accordance with Sections 8.2
and 8.3. Each such adjustment shall be calculated as follows:

                (1) The MWACV (stated in Btu/lb.) of such Shipments shall first
be divided by * * *3 Btu/lb. The resulting quotient shall be known as the
"Calorific Adjustment Factor" for such Shipments.

                (2) Next the then-current Billing Price applicable to such
Shipments (hereinafter referred to as "Applicable Price") shall be determined
and used to make the following calculations:

                    (i) If the Calorific Adjustment Factor for such Shipments is
greater than 1.0000, then the Calorific Adjustment Factor shall be multiplied by
the Applicable Price. The Applicable Price shall then be subtracted from the
resulting product, and the resulting difference shall be known as the "Calorific
Adjustment Amount" for such month. The Calorific Adjustment Amount (a positive
number in this situation) shall then be added

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                                      -10-
<PAGE>

to the Applicable Price, and the resulting sum shall be known as the "Calorific
Value Adjusted Price" for such month.

                    (ii) If the Calorific Adjustment Factor for such Shipments
is less than 1.0000, then the Applicable Price shall be added to the actual
transportation cost (stated on a per-ton basis) borne by PURCHASER (including,
without limitation, railcar costs if such Shipments were transported in railcars
owned or leased by PURCHASER). The resulting sum shall be known as the
"Delivered Cost." The Delivered Cost shall then be multiplied by the Calorific
Value Adjustment Factor. Next the Delivered Cost shall be subtracted from the
resulting product, and the resulting difference shall constitute the Calorific
Adjustment Amount for such month. The Calorific Adjustment Amount (a negative
number in this situation) shall then be added to the Applicable Price, and the
resulting sum shall constitute the Calorific Value Adjusted Price for such
month.

            (b) PURCHASER shall calculate a separate Calorific Value Adjusted
Price for Shipments made in each calendar month under each purchase order issued
by PURCHASER with respect to this Agreement. The Adjustment mechanism set forth
in Section 4.4(a) is further detailed and illustrated in Annex B, which is
attached hereto and made a part of this Agreement: and such adjustments shall be
made in accordance with Annex B.

        4.5 EXCESS ASH ADJUSTMENTS

            (a) In addition to other adjustments, the amount to be paid for
Shipments under each purchase order issued by PURCHASER with respect to this
Agreement shall be adjusted on a monthly basis if the actual monthly weighted
average "as received" ash content (hereinafter referred to as "MWAAC") of such
Shipments, as determined from samples taken and analyzed in accordance with
Sections 8.2 and 8.3, exceeds * * *4. Each such adjustment shall be made after
the calorific value adjustment for such Shipments (pursuant to Section 4.4) and
shall be calculated as follows:

                (1) From the MWAAC (stated as a percentage) of such Shipments, *
* *4 shall first be subtracted. The difference (stated as a percentage) shall be
multiplied by 100 (to eliminate the percentage in further calculations), and the
resulting product shall be known as the "Ash Adjustment Factor" for such
Shipments.

                (2) The Ash Adjustment Factor for such Shipments shall then be
multiplied by * * *4 per ton: and the resulting product shall he subtracted from
the Calorific Value Adjusted Price for such Shipments.

                (3) No adjustment under this Section 4.5(a) shall be made if the
MWAAC of such Shipments is less than or equal to * * *4.

        (b) The adjustment mechanism set forth in Section 4.5(a) is further
detailed and illustrated in Annex C, which is attached hereto and made a part of
this Agreement; and such adjustments shall be made in accordance with Annex C.

        4.6 GRINDABILITY ADJUSTMENTS

        (a) In addition to other adjustments, the amount to be paid for a
Shipment under any purchase order issued by PURCHASER with respect to this
Agreement shall be adjusted if the actual "as received" Hardgrove Grindability
Index ("HGI") value (hereinafter refereed to as "HGIV") for such Shipment, as
determined from

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                                      -11-
<PAGE>

samples taken and analyzed in accordance with Sections 8.2 and
8.3, is more than two units below * * *5. Each such adjustment shall be made
after the calorific value adjustment for such Shipment (pursuant to Section 4.4)
and the excess ash adjustment, if any, for such Shipment (pursuant to Section
4.5) and shall be calculated as follows:

                (1) The HGIV for such Shipment shall first be subtracted from *
* *5, and the resulting difference shall be known as the " HGI Adjustment
Factor" for such Shipment.

                (2) The HGI Adjustment Factor for such Shipment shall then be
multiplied by * * *5 per ton; and the resulting product shall be subtracted from
the Calorific Value Adjusted Price, as reduced by any excess ash adjustment
(pursuant to Section 4.5), for such Shipment.

                (3) No adjustment under this Section 4.6(a) shall be made if the
HGIV for such Shipment is greater than or equal to * * *5.

            (b) The adjustment mechanism set forth in Section 4.6(a) is further
detailed and illustrated in Annex D. which is attached hereto and made a part of
this Agreement; and such adjustments shall be made in accordance with Annex D.

        4.7 EXCESS SULFUR ADJUSTMENTS

            (a) In addition to the foregoing provisions concerning adjustments
to the amount to be paid for Shipments, the following provisions shall apply to
all Shipments under this Agreement during each Contract Year in which the actual
annual weighted average "as received" SO2 content (stated in lbs. SO2/MMBtu)
(hereinafter referred to as "AWASC") of such Shipments, as determined from
samples taken and analyzed in accordance with Section 8.2 and 8.3. exceeds * *
*5:

                (1) From the AWASC of such Shipments, * * *5 shall first be
subtracted. The number of lbs. SO,/MMBtu reflected in the resulting difference
shall be known as the "Sulfur Adjustment Factor" for such Shipments

                (2) The Sulfur Adjustment Factor for such Shipments shall then
be multiplied by the total Btu content (stated in MMBtu) of all Shipments under
this Agreement during the Contract Year involved; and the resulting product
(stated in lbs.) shall be divided by 2000 and rounded to the nearest whole unit.
The amount resulting from such calculation shall be known as the "Excess Tons of
S02" for such Contract Year. As soon as practicable after the end of such
Contract Year (but no later than sixty days after the end of such Contract
Year), PURCHASER shall prepare and submit to SALES AGENT a statement that shall
reflect the amount of Excess Tons of S02 for such Contract Year.

                (3) With respect to each Contract Year for which Excess Tons of
S02 have been calculated as provided in this Section 4.7(a), SELLER shall
transfer to PURCHASER the number of S02 allowances that is equal to the amount
of Excess Tons of S02 set forth in the statement submitted by PURCHASER pursuant
to Section 4.7(a)(2). Within thirty days after SALES AGENT has received such
statement, SELLER shall submit to PURCHASER a completed EPA Allowance Transfer
Form authorizing transfer of the required number of SO, allowances from SELLER's
EPA account to an EPA account designated by PURCHASER.

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                                      -12-
<PAGE>

                (4) No transfer of S02 allowances under this Section 4.7(a)
shall be made if the AWASC of such Shipments is less than or equal to * * *6.

            (b) In addition to other adjustments (including, without limitation,
any adjustment that may be available under Section 4.7(a)), PURCHASER may adjust
the amount to be paid for any Shipment that is accepted by PURCHASER in which
the actual "as received" sulfur content is greater than or equal to * * *6. Each
such adjustment shall be subject to the following provisions:

                (1) The amount of such adjustment shall be * * *6 of the
then-current Billing Price applicable to the Shipment, and such amount shall be
deducted from the then-current Billing Price as liquidated damages for
administrative costs and other incidental expenses related to the handling and
disposition of the Shipment. The Parties hereby agree that such amount is a
reasonable pre-loss estimate of PURCHASER's damages, which are difficult to
measure, and that such amount is not intended as a penalty.

                (2) Such adjustment shall be made only if the Shipment is
accepted by PURCHASER; and SELLER acknowledges that the remedy provided in this
Section 4.7(b) shall in no way obligate PURCHASER to accept the Shipment nor
prevent PURCHASER from exercising other rights and remedies with respect to the
Shipment (including, without limitation, the right to reject the Shipment as
provided in Section 7.3).

            (c) The adjustment mechanisms set forth in Sections 4.7(a) and
4.7(b) are further detailed and illustrated in Annex E, which is attached hereto
and made a pan of this Agreement; and such adjustments shall he made in
accordance with Annex E.

        4.8 Calculation of Adjustments. Within sixty days after the end of each
calendar month, PURCHASER shall calculate the adjustments to be made pursuant to
Sections 4.4, 4.5, 4.6, and 4.7(b); and within sixty days after the end of each
Contract Year, PURCHASER shall calculate the adjustment, if any, to be made
pursuant to Section 4.7(a). PURCHASER shall submit to SALES AGENT a report
showing such calculations for all Shipments during such calendar month or such
Contract Year, as the case may be, under each purchase order issued by PURCHASER
with respect to this Agreement. Such report shall include the analyses of
Shipments on which such calculations are based and shall state the amount to be
paid by PURCHASER for such Shipments, as determined in accordance with the
applicable provisions of this Agreement. The adjustments provided in Sections
4.4. 4.5. 4.6. and 4.7 are cumulative in nature and are in addition to any other
rights or remedies available to PURCHASER under this Agreement, at law, or in
equity.

SECTION 5: PRICE REVIEWS

        5.1 General Provisions for Price Reviews. Notwithstanding the price
adjustment provisions of Section 4.2, either PURCHASER or SELLER may elect to
have a price review conducted concerning * * *6 tons ("Review Tonnage") of the
Base Tonnage to be supplied under this Agreement * * *6. Such price reviews may
result in prices for the Base Tonnage during the * * *6 that are different from
the Base Price, as adjusted under Section 4.2, and shall be conducted as
follows:

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                                      -13-
<PAGE>

            (a) At any time during the period from * * *7, through * * *7 (but
not more than once during such period), either PURCHASER Or SELLER may elect to
have a price review conducted concerning the Review Tonnage for the * * *7. If
SELLER elects to have a price review conducted. SELLER shall give PURCHASER
written notice of such election; or if PURCHASER elects to have a price review
conducted. PURCHASER shall give SALES AGENT written notice of such election.
Such notice, whether given by SELLER or PURCHASER, shall be sent no later than *
* *7; provided, however, that after such notice is sent, the notice may not be
withdrawn or rescinded unless the Parties subsequently agree not to conduct a
price review for the * * *7. In the event that both SELLER and PURCHASER send
such notices, only one price review shall be conducted for the * * *7.

            (b) At any time during the period from * * *7, through * * *7 (but
not more than once during such period),. either PURCHASER or SELLER may elect to
have a price review conducted concerning the Review Tonnage for the * * *7. If
SELLER elects to have a price review conducted. SELLER shall give PURCHASER
written notice of such election: or if PURCHASER elects to have a price review
conducted. PURCHASER shall give SALES AGENT written notice of such election.
Such notice, whether given by SELLER or PURCHASER, shall be sent no later than *
* *7; provided, however, that after such notice is sent, the notice may not be
withdrawn or rescinded unless the Parties subsequently agree not to conduct a
price review for the * * *7. In the event that both SELLER and PURCHASER send
such notices, only one price review shall be conducted for the * * *7.

            (c) Promptly after PURCHASER has received a written notice from
SELLER pursuant to Section 5.1 (a) or 5.1 (b) or has sent a written notice to
SALES AGENT pursuant to Section 5.1 (a) or 5.1(b), PURCHASER shall conduct a
price review concerning the Review Tonnage as follows:

                (1) PURCHASER shall first solicit bids from other coal suppliers
to supply coal produced from mines * * *7 during the * * *7 under terms and
conditions similar to the terms and conditions of this Agreement; provided,
however, that if PURCHASER changes its strategy for compliance with
Environmental-Related Requirements (as defined in Section 11.2(a)) after January
1, 2004, PURCHASER may decide, in the exercise of its reasonable judgment, to
use * * *7 with specifications different from the specifications set forth in
Section 7.1(a) and may consider * * *7 with such different specifications in
conducting the price review. PURCHASER shall consider only bona fide offers
received from viable suppliers ("Qualifying Offers") in evaluating bids
submitted to PURCHASER in response to such solicitation.

                (2) Based on Qualifying Offers received * * *7 in which the
price review is conducted, PURCHASER shall then determine the lowest weighted
average delivered cost ("Lowest Delivered Cost") as of * * *7 of the next * * *7
for * * *7 of * * *7 that PURCHASER could buy from one or more suppliers who
have submitted Qualifying Offers for delivery during the * * *7. In determining
the Lowest Delivered Cost related to each price review, PURHASER shall take into
account then-current costs for transportation, taxes, S02 allowances, NOx
allowances, and other applicable emission allowances related to each Qualifying
Offer.

                (3) After PURCHASER has determined the Lowest Delivered Cost as
of * * *7 of the next * * *7, the following provisions shall apply:

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                                      -14-
<PAGE>

                    (i) With respect to the price review, if any, for the * *
*8, PURCHASER shall calculate, based on the Lowest Delivered Cost as of * * *8,
an equivalent price f.o.b. railcar at SELLER's Loading Facility at * * *8, as of
* * *8 that would apply to the Review Tonnage if supplied from one or more of
SELLER's Loading Facilities during the * * *8. PURCHASER shall calculate the * *
*8 and give SALES AGENT written notice of the * * *8 within sixty days after
PURCHASER has sent or received, as the case may be, the notice pursuant to
Section 5.1(a). After the * * *8 is given, the provisions of Section 5.2 shall
apply.

                    (ii) With respect to the price review, if any, for the * *
*8, PURCHASER shall calculate, based on the Lowest Delivered Cost as of * * *8,
an equivalent price f.o.b. railcar at SELLER's Loading Facility at * * *8, as of
* * *8 that would apply to the Review Tonnage if supplied from one or more of
SELLER's Loading Facilities during the * * *8. PURCHASER shall calculate the * *
*8 and give SALES AGENT written notice of the * * *8 within sixty days after
PURCHASER has sent or received, as the case may be, the notice pursuant to
Section 5.1(b). After the * * *8 is given, the provisions of Section 5.3 shall
apply.

                    (iii) The Parties acknowledge and agree that in determining
the * * *8 and the * * *8, PURCHASER shall not consider potential purchases of
synthetic fuel or other alternative fuel.

            (d) PURCHASER shall thereafter calculate the adjustments, if any, to
the * * *8 as provided in Section 5.2(b)(3). All calculations of the * * *8 and
the * * *8, as the case may be, and any adjustments thereto shall be carried to
six decimal places and then rounded to four decimal places.

            (e) Regardless of whether a price review is conducted during a * *
*8, either SELLER or PURCHASER may elect to have a price review conducted during
any * * *8.

        5.2 * * *8. With respect to the price review, if any, for the * * *8,
the following provisions shall apply after the * * *8 is given:

            (a) Within fifteen days after SALES AGENT has received the * * *8,
SALES AGENT shall decide whether (i) to accept the * * *8 or (ii) to reduce the
Base Tonnage by * * *8 tons for the * * *8. SALES AGENT shall give PURCHASER
written notice of such decision no later than the fifteenth day after SALES
AGENT received the * * *8.

            (b) if SALES AGENT decides to accept the * * *8 and gives timely the
written notice required from SALES AGENT under Section 5.2(a), the following
provisions shall apply:

                (1) PURCHASER shall calculate a weighted average price for all
Shipments during * * *8, which shall be based on (i) * * *8 and (ii) * * *8.

                (2) The * * *8 shall become effective as of * * *8, and shall
remain firm through * * *8, unless adjusted after * * *8, pursuant to Section
4.3. The * * *8 shall apply to all Shipments during the * * *8.

                (3) The * * *8 shall be adjusted after * * *8, by increasing the
* * *8. The * * *8, as adjusted pursuant to this Section 5.2(b)(3), shall be
known as the * * *8. The * * *8 shall remain firm through * * *8, unless further
adjusted pursuant to Section 4.3, and shall be applied thereafter as provided in
Section 5.3(b)(1).

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                                      -15-
<PAGE>

            (c) If SALES AGENT decides not to accept the * * *9 or fails to give
timely the written notice required from SALES AGENT under Section 5.2(a), the
Base Tonnage for the * * *9 shall automatically be reduced to * * *9.

        5.3 * * *9. With respect to the price review, if any, for the * * *9,
the following provisions shall apply after the * * *9 is given:

            (a) Within fifteen days after SALES AGENT has received the * * *9,
SALES AGENT shall decide whether (i) to accept the * * *9 or (ii) to reduce the
Base Tonnage by * * *9 for the * * *9. SALES AGENT shall give PURCHASER written
notice of such decision no later than the fifteenth day after SALES AGENT
received the * * *9.

            (b) If SALES AGENT decides to accept the * * *9 and gives timely the
written notice required from SALES AGENT under Section 5.3(a), the following
provisions shall apply:

                (1) PURCHASER shall calculate a weighted average price for all
Shipments during the * * *9, which shall be based on (i) * * *9 and (ii) one of
the following, as appropriate:

                    (A) * * *9; or

                    (B) * * *9.

                (2) * * *9.

            (c) if SALES AGENT decides not to accept the * * *9 or fails to give
timely the written notice required from SALES AGENT under Section 5.3(a). the
Base Tonnage for the * * *9 shall automatically be reduced to (i) * * *9, or
(ii) * * *9.

SECTION 6: QUANTITY REQUIREMENTS

        6.1 Base Tonnage. Except as otherwise provided in this Agreement, SELLER
shall supply to PURCHASER, and PURCHASER shall purchase from SELLER, the Base
Tonnage of 3,000,000 tons of coal during each Contract Year, which shall be
supplied in approximately equal monthly Shipments.

        6.2 Quarterly Amount. The Quarterly Amount for each Quarter of each
Contract Year is 750,000 tons.

        6.3 Reductions in Base Tonnage and Quarters Amount. Notwithstanding the
provisions of Sections 6.1 and 6.2. the following provisions shall apply:

            (a) The Base Tonnage for the first Contract Year (2004) shall be
reduced by the quantity of coal actually supplied by SELLER to PURCHASER under
the Prior Agreement during the period from (i) January 1, 2004, through (ii) the
Effective Date. The Quarterly Amount for the first Quarter of the first Contract
Year shall be reduced by the quantity of coal actually supplied by SELLER to
PURCHASER under the Prior Agreement during the period from (i) January 1, 2004,
through (ii) March 31, 2004; and the Quarterly Amount for the second Quarter of
the first Contract Year shall be reduced by the quantity of coal. if any,
actually supplied by SELLER to PURCHASER under the Prior is Agreement during the
period from (i) April 1, 2004 through (ii) June 30, 2004.

            (b) The Base Tonnage for each Contract Year after the first Contract
Year (2004) may be reduced, as provided in Sections 5.2(c) and 5.3(c), in
connection with price reviews conducted under this Agreement; and for

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                                      -16-
<PAGE>

each Quarter of a Contract Year in which the Base Tonnage is reduced, the
Quarterly Amount shall be proportionately reduced. (For example, if the Base
Tonnage for 2005 were reduced to 2,000,000 tons, the Quarterly Amount for each
Quarter of 2005 would be reduced to 500,000 tons.) Any reduction in the Base
Tonnage for a Contract Year shall automatically reduce the Base Tonnage for each
subsequent Contract Year, and all reductions in the Base Tonnage shall be
cumulative. (For example, if the Base Tonnage for 2005 were reduced to 2,000,000
tons, the Base Tonnage for 2006 would automatically be reduced to 2,000,000 tons
and would be subject to further reduction pursuant to Section 5.3(c).)

        6.4 SHORTFALLS IN SHIPMENTS

            (a) During each Quarter of each Contract Year, SELLER shall supply
no less than (i) 90% of the Quarterly Amount for such Quarter and (ii) the
amount of the Tonnage Shortfall, if any, for the immediately preceding Quarter.
(The sum of the (i) amount and the (ii) amount is hereinafter referred to as the
"Quarterly Requirement.") Notwithstanding the foregoing provisions of this
Section 6.4(a), the following provisions shall apply:

                (1) If SELLER supplies, during a Quarter, more than 100% of the
Quarterly Requirement for such Quarter. the amount by which the quantity
actually supplied during such Quarter exceeds the Quarterly Requirement for such
Quarter shall be known as the "Excess Amount." SELLER may reduce the Quarterly
Requirement for any subsequent Quarter by an amount up to (but not exceeding)
the Excess Amount; provided, however, that SELLER shall remain obligated to
supply, during such subsequent Quarter, no less than 90% of the Quarterly Amount
for such subsequent Quarter. If SELLER intends to reduce the Quarterly
Requirement for a subsequent Quarter pursuant to this Section 6.4(a)(1), SELLER
shall give PURCHASER written notice of such reduction within thirty days after
the end of the Quarter in which the Excess Amount was supplied; and such notice
shall specify the amount of such reduction and the subsequent Quarter in which
such reduction shall occur.

                (2) If PURCHASER exercises its right under Section 6.4(b) to buy
replacement coal for some or all of a Tonnage Shortfall, SELLER shall be excused
from its obligation to supply that portion of the Tonnage Shortfall for which
PURCHASER has bought replacement coal.



                                      -17-
<PAGE>

            (b) In the event that (i) SELLER fails to supply the Quarterly
Requirement during any Quarter and (ii) such failure does not result from an
event of force majeure (whether under the terms of Section 11.1 or under the
Rail Contract) or a cause or circumstance within PURCHASER's control, then
PURCHASER may buy replacement coal and hold SELLER liable for the cost of such
replacement coal as provided in Section 6.4(d).

            (c) In the event that (i) SELLER fails to supply 100% of the Base
Tonnage (as reduced where appropriate under Section 6.3) during any Contract
Year and (ii) such failure does not result from an event of force majeure
(whether under the terms of Section 11.1 or under the Rail Contract) or a cause
or circumstance within PURCHASER's control, then PURCHASER may buy replacement
coal and hold SELLER liable for the cost of such replacement coal as provided in
Section 6.4(d).

            (d) If PURCHASER exercises its right to buy replacement coal and
hold SELLER liable for the cost of such replacement coal, the following
provisions shall apply:

                (1) PURCHASER shall first determine the amount of the Tonnage
Shortfall for the Shortfall Period involved and shall give SELLER written notice
of such amount. PURCHASER may then buy replacement coal (of similar, but not
exactly the same, quality) from one or more third parties in an amount up to
(but not exceeding) the amount of the Tonnage Shortfall and arrange to have such
replacement coal supplied at such times as PURCHASER deems appropriate during
the twelve-month period after the end of the Shortfall Period involved.

                (2) SELLER shall be liable to PURCHASER for the difference
between (i) the actual delivered cost incurred by PURCHASER (including, without
limitation, the costs of transportation, SO2 emission allowances, NOx emission
allowances, and taxes) to obtain such replacement coal and (ii) the delivered
cost of SELLER's coal (including, without limitation, the costs of
transportation, SO2 emission allowances, NOx emission allowances, and taxes) as
of the end of the Shortfall Period involved.

            (e) After PURCHASER has determined the amounts for which SELLER is
liable under Section 6.4(d)(2), PURCHASER shall promptly prepare and submit to
SELLER an invoice for such amounts. SELLER shall pay the amounts reflected in
such invoice within fourteen days after SELLER has received such invoice. If
SELLER fails to pay such amounts within such fourteen-day period, PURCHASER may
immediately set off such amounts against, and deduct such amounts from, one or
more payments due from PURCHASER to SELLER or SALES AGENT under this Agreement.
PURCHASER may retain all sums deducted from such payments pursuant to this
Section 6.4(e) as satisfaction of the amounts owed by SELLER to PURCHASER under
Section 6.4(d)(2) and may recover any remaining amounts from SELLER as provided
by law.

            (f) Notwithstanding the provisions of Section 6.4(c), PURCHASER may
elect, in its sole discretion, to require SELLER to make up the Tonnage
Shortfall for any Contract Year under the following circumstances and
conditions:

                (1) PURCHASER may exercise such right in the event that (i)
SELLER fails to supply 100% of the Base Tonnage (as reduced where appropriate
under Section 6.3) during any Contract Year and (ii) such failure does not
result from an event of force majeure (whether under the terms of Section 14.1
or under the Rail Contract) or a cause or circumstance within PURCHASER's
control.


                                      -18-
<PAGE>

                (2) PURCHASER shall calculate the difference between (i) the
amount of the Base Tonnage (as reduced where appropriate under Section 6.3) for
the Contract Year involved and (ii) the actual quantity of coal supplied under
this Agreement during such Contract Year. (Such difference is hereinafter
referred to as "Annual Shortfall.") Within sixty days after the end of the
Contract Year in which the Annual Shortfall occurred ("Shortfall Year"),
PURCHASER shall give SALES AGENT written notice that PURCHASER has decided to
make up some or all of the Annual Shortfall. Such notice shall specify the
quantity of the Annual Shortfall that PURCHASER has decided to have made up
("Makeup Quantity") and shall set forth a proposed loading schedule for the
Makeup Quantity. Upon SALES AGENT's receipt of such notice, the Parties shall
immediately enter into discussions in a good-faith effort to establish a loading
schedule for the Makeup Quantity to be supplied during the twelve-month period
after the end of the Shortfall Year.

                (3) If the Parties establish a loading schedule for the Makeup
Quantity as provided in Section 6.4(f)(2), SELLER shall supply the Makeup
Quantity according to such schedule. The Billing Price for all portions of the
Makeup Quantity shall be determined according to the Billing Price in effect at
the end of the Shortfall Year.

                (4) If the Parties fail to establish, within ninety days after
the end of the Shortfall Year, a loading schedule that is mutually acceptable to
the Parties, PURCHASER may buy, at any time during the twelve-month period after
the end of the Shortfall Year, replacement coal and hold SELLER liable for the
cost of replacement coal as provided in Section 6.4(d), in which event no
additional notice from PURCHASER to SELLER under Section 6.4(d)(l) shall be
required.

        (g) The provisionsof Section 6.4 shall survive the termination or
expiration of this Agreement.



                                      -19-
<PAGE>

SECTION 7: QUALITY REQUIREMENTS

        7.1 COAL SPECIFICATIONS

            (a) Each Shipment under this Agreement shall be either "run-of-mine"
or "washed run-of-mine" coal or a blend of "run-of-mine" and "washed
run-of-mine" coal, shall be three inches and under in size (3" x 0") as defined
in the then-current American Society for Testing and Materials ("ASTM") D-431
"Standard for Designating Size of Coal" with no intermediate size fractions
added or removed, shall not contain more than 50% of particles less than 1/4
inch in size, and shall be prepared so as to be free from excess quantities of
pond fines, washer fines and refuse, bone, slate, shale, fireclay, rock, loose
clay, and extraneous materials (including, without limitation, plastic, rubber,
iron, wood. and other waste materials). In addition, each Shipment shall conform
to the following analysis (all percentages shown being percentages by weight):

<TABLE>
<CAPTION>
                                             "As Received"           "As Received"         "As Received"
                                            Monthly Weighted       Suspension Limits     Rejection Limits
               Specifications            Average Requirements*     (Per Unit Train)      (Per Unit Train)
               --------------            ---------------------     ----------------      ----------------
<S>                                             <C>                     <C>                   <C>
          Maximum Moisture (total)              * * *10                 * * *10               * * *10
                 Maximum Ash                    * * *10                 * * *10               * * *10
             Maximum Pounds SO2                 * * *10                 * * *10               * * *10

           Minimum Volatile Matter              * * *10                 * * *10               * * *10
       Minimum Ash Fusion Temperature-          * * *10                 * * *10               * * *10
           Softening (H=W reducing
                 atmosphere)
            Minimum Grindability                * * *10                 * * *10               * * *10
       (Hardgrove Grindability Index)
           Minimum Calonfic Value               * * *10                 * * *10               * * *10

       *These parameters are monthly weighted average requirements, except as otherwise noted.
       **The "As Received" Rejection Limit for Maximum Pounds SO, shall automatically change to * * *10
</TABLE>

            (b) In the event that PURCHASER experiences operational difficulties
due to excessive impurities or contaminants in the coal supplied under this
Agreement. PURCHASER shall promptly give written notice to SELLER; and the
Parties shall work in good faith to identify and eliminate the cause(s) of such
problems and to develop a mutually acceptable plan for continuation of
Shipments.

            (c) In order to comply with the nitrogen oxide ("NOx") provisions of
the Clean Air Act Amendments of 1990. as amended. judicial and administrative
interpretations thereof, and regulations promulgated thereunder ("Clean Air
Requirements"), PURCHASER may analyze the coal supplied under this Agreement to
determine (in PURCHASER's sole judgment) whether SELLER's coal, when used at the
destination plant, causes the destination plant to exceed applicable NOx
emission limitations of the Clean Air Requirements. In performing such analysis.
PURCHASER may evaluate the combination of (i) the percent nitrogen, (ii) the
ratio of fixed carbon to volatile matter, and (iii) other coal quality
characteristics of SELLER's coal by using an Electric Power Research Institute
product referred to as the EPRI NOx/LOI Predictor (EPRI TR-109208 or subsequent
versions). PURCHASER may

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                                      -20-
<PAGE>

also consider its actual operating experience with SELLER's coal and the amount
of NOx emissions produced by using SELLER's coal at the destination plant.

            (d) In the event that PURCHASER determines, as provided in Section
7.1(c). that SELLER's coal has caused or is causing the destination plant to
exceed applicable NOx emission limitations of the Clean Air Requirements, then
PURCHASER may terminate this Agreement by giving SELLER written notice thereof,
which shall specify the effective date of termination and shall be given at
least thirty days prior to such date.

        7.2 REIMBURSEMENT FOR EQUIPMENT DAMAGE. SELLER shall reimburse PURCHASER
for all damage to PURCHASER's equipment directly caused by any extraneous
material loaded with any Shipment, as well as for damages to PURCHASER's
equipment caused by any Shipment that fails to meet the specifications set forth
in Section 7.1; provided, however, that SELLER shall not be liable for lost
generating capacity or lost production of electricity.

        7.3 REJECTION OF SHIPMENTS

            (a) In addition to and not as a limitation on PURCHASER's other
rights or remedies under this Agreement, PURCHASER may, reject any Shipment
under any one or more of the following circumstances: (i) the Shipment fails to
comply with one or more of the "As Received" Rejection Limits set forth in
Section 7.1(a); (ii) the Shipment fails to comply with the coal size
specifications set forth in Section 7.l (a); (iii) the Shipment contains
extraneous material as described in Section 7.1(a); (iv) the Shipment fails to
comply with the loading requirements set forth in Section 9.2; or (v) the
Shipment contains coal that was mined or produced from a source other than the
Coal Property without obtaining PURCHASER's prior written consent. PURCHASER
shall give SELLER prompt notice, orally or in writing, of the rejection of a
Shipment. After receipt of such notice. SELLER shall not resume Shipments under
this Agreement until the coal quality or other deficiency has been corrected to
PURCHASER's satisfaction. In the event that PURCHASER rejects a Shipment, then
SELLER shall immediately remove, at SELLER's expense, the Shipment from
PURCHASER's facilities or from transportation equipment and shall reimburse
PURCHASER for all charges and costs (including, without limitation,
transportation costs) incurred by PURCHASER in connection with the equipment.

            (b) In the event that PURCHASER, in its sole discretion, accepts any
Shipment for which the as received" analysis exceeds any one or more of the "As
Received" Rejection Limits set forth in Section 7.1(a), then the following price
adjustments shall apply and shall be in addition to (i) the calorific value and
excess ash adjustments, if any, for the Shipment (pursuant to Sections 4.4 and
4.5) and (ii) any other adjustment for the Shipment (pursuant to Section 4.6 or
4.7):

                * * *11

        The price adjustment mechanisms set forth in this Section 7.3(b) are
further detailed and illustrated in Annex F, which is attached hereto and made a
part of this Agreement.

            (c) PURCHASER's election to accept a Shipment that fails to comply
with any one or more of the "As Received" Rejection Limits set forth in Section
7.1(a) and to apply one or more of the price adjustments under

-------
  11    Confidential material redacted and filed separately with the Commission.

                                      -21-
<PAGE>

Section 7.3(b) shall not affect any of PURCHASER's other rights and remedies
under this Agreement (including, without limitation, PURCHASER's right to reject
subsequent Shipments that fail to comply with any one or more of the "As
Received" Rejection Limits set forth in Section 7.l (a)).

            (d) In addition to the provisions set forth in Section 8.2 regarding
sampling, PURCHASER may collect samples of one or more Shipments while they are
in transit and may analyze such samples for the purpose of determining whether
to accept or to reject such Shipment(s) for failure to comply with the
specifications set forth in Section 7.1 or other terms and conditions of this
Agreement. In the case of any Shipment that is accepted, the samples of the
Shipment taken in transit and the results of such analyses shall not be used for
other purposes; and the provisions in Sections 8.2 and 8.3 shall apply.

        7.4 SUSPENSION AND TERMINATION FOR QUALITY VARIATIONS

            (a) In addition to and not as a limitation on PURCHASER's other
rights or remedies under this Agreement. PURCHASER may suspend Shipments
immediately, by giving written notice to SELLER, under any one or more of the
following circumstances: (i) any Shipment fails to comply with one or more of
the "As Received" Suspension :Limits set forth in Section 7.1(a); (ii) any
Shipment contains extraneous material as described in Section 7.1(a); (iii) any
Shipment fails to comply with the loading requirements set forth in Section 9.2;
or (iv) any Shipment contains coal that was mined or produced from a source
other than the Coal Property without obtaining PURCHASER's prior written
consent. PURCHASER, at its sole option, may accept any Shipment(s) in transit at
the time such notice is given. Three or more suspensions under this Agreement
during any consecutive ninety-day period shall be deemed a material breach of
this Agreement, for which PURCHASER, in its sole discretion, may terminate this
Agreement immediately by giving SELLER written notice thereof, which shall
specify the effective date of termination.

            (b) After a notice of suspension is given pursuant to Section
7.4(a), PURCHASER may terminate this Agreement, as provided in Section 7.4(c),
unless SELLER gives adequate assurance, within fifteen days after SELLER has
received such notice, that SELLER can and will comply with the specifications
set forth in Section 7.1 and the other requirements of this Agreement. Such
assurance may, at PURCHASER's sole option, be provided by means of a complying
test Shipment scheduled and sampled by such method as is acceptable to
PURCHASER. SELLER shall bear all special handling costs associated with any test
Shipment (including, without limitation, costs related to transportation and
stockpile segregation). Any Tonnage Shortfall resulting from a suspension under
Section 7.4(a) shall not be supplied at a later time unless PURCHASER, in its
sole discretion, directs SELLER to make up the Tonnage Shortfall. If PURCHASER
elects to make up the Tonnage Shortfall, the Parties shall agree on a schedule
that shall allow the Tonnage Shortfall to be supplied within a period no longer
than twelve months after Shipments have resumed: and the term of this Agreement
may be extended to accommodate such schedule. The price to be paid for any such
makeup tons shall be determined according to the Billing Price in effect during
the period in which Shipments were suspended.

            (c) If (i) PURCHASER does not receive, within thirty days after
SELLER's receipt of a notice of suspension pursuant to Section 7.4(a), adequate
assurance of SELLER's ability to supply coal that complies with the requirements
of this Agreement or (ii) a test Shipment under Section 7.4(b) fails to comply
with such requirements.

                                      -22-
<PAGE>

PURCHASER shall notify SELLER of such circumstance. At the same time, PURCHASER
may cancel the remaining Shipments to be supplied under this Agreement and may
terminate this Agreement immediately by giving SELLER written notice thereof.
which shall specify the effective date of termination.

            (d) In the event that PURCHASER suspends Shipments pursuant to
Section 7.4(a) or terminates this Agreement pursuant to Section 7.4(a) or
7.4(c). SELLER shall reimburse PURCHASER for all freight charges or other costs
that are caused by such suspension and are incurred by PURCHASER as a result of
reduced tonnages transported under the Rail Contract. The payment obligation
imposed on SELLER by this Section 7.4(d) is in the nature of a cost adjustment
and is without prejudice to, and in addition to, such other rights or remedies
that PURCHASER may have under other provisions of this Agreement or at law or in
equity.

        7.5 CANCELLATION AND TERMINATION

            (a) In addition to and not as a limitation on PURCHASER's other
rights or remedies under this Agreement. PURCHASER may cancel the remaining
Shipments to be supplied under this Agreement and may terminate this Agreement
immediately under any one or more of the following circumstances: (i) 30% or
more of all Shipments during a thirty-day period, following a notice of
suspension pursuant to Section 7.4(a), fail to comply with one or more of the
"As Received" Monthly Weighted Average Requirements set forth in Section 7.1 (a)
with respect to moisture, ash, volatile matter, and calorific value or with one
or more of the per-Shipment requirements set forth in Section 7.1 (a) with
respect to AFT and grindability; (ii) Shipments, When averaged over two
consecutive calendar months, fail to comply with one or more of the "As
Received" Monthly Weighted Average Requirements set forth in Section 7.1 (a)
with respect to moisture, ash, volatile matter, and calorific value or with one
or more of the per-Shipment requirements set forth in Section 7.1(a) with
respect to AFT and grindability; (iii) the SO2 content of Shipments, when
averaged over two consecutive Contract Years * * *12; (iv) SELLER fails to
supply at least 75% of the Quarterly Amount to be supplied during any Quarter
and such failure is not excused by force majeure (whether under the terms of
Section IL 1 or under the Rail Contract) or a cause or circumstance within
PURCHASER's control; (v) any Shipment contains coal that was mined or produced
from a source other than the Coal Property without obtaining PURCHASER's prior
written approval; or (vi) SELLER has engaged in any fraudulent or illegal
conduct in connection with its performance under this Agreement.

            (b) PURCHASER shall exercise its right of termination under Section
7.5(a) by giving SELLER written notice thereof., which shall specify the
effective date of termination.

        7.6 COSTS RELATED TO TERMINATION. In the event that PURCHASER terminates
this Agreement pursuant to Section 7.4, 7.5, or 10.1, then SELLER shall
reimburse PURCHASER for all charges or costs actually incurred by PURCHASER
under the Rail Contract as a result of the termination of this Agreement.
PURCHASER's rights of termination under Sections 7.4, 7.5, and 10.1 and
reimbursement under this Section 7.6 are in addition to any other rights or
remedies provided to PURCHASER under Section 7.7 or available to PURCHASER at
law or in equity for SELLER's failure to supply coal that complies with the
requirements of this Agreement.

-------
  12    Confidential material redacted and filed separately with the Commission.

                                      -23-
<PAGE>

        7.7 REPLACEMENT COAL. In the event that PURCHASER terminates this
Agreement under Section 7.4(a), 7.4(c), 7.5(a), or 10.1, then PURCHASER may buy
replacement coal and hold SELLER liable for the cost of replacement coal under
the following circumstances and conditions:

            (a) PURCHASER shall first determine the remaining quantity of coal
to be supplied under this Agreement (calculated according to the quantities set
forth in Section 6.1, as reduced where appropriate under Section 6.3) as of the
effective date of termination ("Remaining Quantity") and shall give SELLER
written notice of the Remaining Quantity. PURCHASER may then buy, from time to
time, replacement coal (of similar, but not exactly the same, quality) from one
or more third parties in an amount up to (but not exceeding) the amount of the
Remaining Quantity and arrange to have such replacement coal supplied at such
times as PURCHASER deems appropriate prior to December 31, 2006.

            (b) SELLER shall be liable to PURCHASER for the difference between
(i) the actual delivered cost incurred by PURCHASER (including, without
limitation, the costs of transportation, SO2 emission allowances. NOx emission
allowances, and taxes) to obtain such replacement coal and (ii) the delivered
cost of SELLER's coal (including, without limitation, the costs of
transportation, SO2 emission allowances, NOx emission allowances, and taxes) as
of the effective date of termination. SELLER shall also be liable to PURCHASER
for charges and costs related to such termination as provided in Section 7.6.

            (c) After PURCHASER has determined the amounts for which SELLER is
liable under Section 7.7(b), PURCHASER shall promptly prepare and submit to
SELLER an invoice for such amounts. SELLER shall pay the amounts reflected in
such invoice within fourteen days after SELLER has received such invoice. If
SELLER fails to pay such amounts within such fourteen-day period, PURCHASER may
immediately set off such amounts against, and deduct such amounts from, one or
more payments due from PURCHASER to SELLER or SALES AGENT under this Agreement.
PURCHASER may retain all sums deducted from such payments pursuant to this
Section 7.7(c) as satisfaction of the amounts owed by SELLER to PURCHASER under
Section 7.7(b) and may recover any remaining amounts from SELLER as provided by
law.

            (d) The provisions of Section 7.7 shall survive the termination or
expiration of this Agreement.

SECTION 8: WEIGHING AND SAMPLING

        8.1 WEIGHING OF SHIPMENTS

            (a) Unless the Parties otherwise agree. SELLER shall determine the
net weight of each Shipment under this Agreement on a certified scale at
SELLER's Loading Facility at Hignite, Clover, Buckeye, Leatherwood, Burke, or
Bevins Branch, Kentucky. SELLER shall bear all costs related to obtaining an
acceptable weight for each Shipment and shall report the weight on the shipping
notice provided for the Shipment pursuant to Section 9.3. Stenciled tare weights
shall not be used in calculating the net weight of any Shipment. PURCHASER shall
have the option, which may be exercised at any time during the term of this
Agreement, to weigh Shipments, for governing purposes and at PURCHASER's
expense, on a certified scale at the destination plant or such other point as is
specified by PURCHASER.

            (b) SELLER shall operate its weighing system in a manner that is
acceptable to PURCHASER and the rail carrier and shall maintain and test the
weighing system in accordance with the rules and regulations contained in

                                      -24-
<PAGE>

the then-current Association of American Railroads "Scale Handbook" which are
based on the National Institute of Standards and Technology "Handbook 44"
entitled "Specifications, Tolerances and Other Technical Requirements for
Commercial Weighing and Measuring Devices." The following provisions shall also
apply to the operation of the weighing system:

                (1) The weighing system shall be tested and certified on a
semiannual basis and shall be maintained at all times as close as practicable to
the condition established during the certification tests. If a coupled-in-motion
("CIM") track scale is used, an initial "as used" test shall be performed using
the number of railcars normally tendered. The "as used" test shall be conducted
in two parts: (i) the test shall first be performed to certify the CIM scale to
weigh a unit train with empty railcars; and (ii) the test shall then be
performed to certify the CIM scale to weigh a unit train with loaded railcars.
Subsequent certification tests utilizing a smaller number of railcars may be
acceptable if such tests are demonstrated to represent the "as used" test.

                (2) SELLER shall promptly notify PURCHASER, orally or in
writing, of all maintenance work on the weighing system, other than routine
maintenance activities, or any modifications to the system.

                (3) PURCHASER or its representative may observe the weighing of
any Shipment under this Agreement.

                (4) In the event that the weighing system ceases to operate
properly, then SELLER shall immediately notify PURCHASER or its representative,
orally or in writing,.to determine the course of action to be taken concerning
subsequent Shipments under this Agreement; and PURCHASER's representative may
direct SELLER to delay or stop the loading of any one or more Shipments under
this Agreement. After any such direction is given, the following provisions
shall apply:

                    (i) SELLER shall immediately delay or stop, as the case may
be, the loading of such Shipment(s); and SELLER shall pay all charges and costs
incurred by PURCHASER as a result of such delay or stoppage in the loading of
such Shipment(s).

                    (ii) SELLER shall repair the weighing system as soon as
practical, and Shipments under this Agreement shall not resume until (i) such
repair is completed or (ii) the Panies mutually agree on a method for weighing
Shipments under this Agreement.

            (c) In the event that SELLER fails to provide the weight of any
Shipment, then PURCHASER shall determine the method by which the weight of the
Shipment shall be obtained; and such method may not be the same as that required
under the Rail Contract.

            (d) In addition to its own representative, PURCHASER may have
members of regulatory bodies having jurisdiction over SELLER's weighing system
present to observe the weighing of any Shipment under this Agreement. If
PURCHASER at any time questions the accuracy of the weight of any Shipment,
PURCHASER shall promptly notify SELLER. orally or in writing: and SELLER shall
then permit PURCHASER's representative to test SELLER's weighing system or
weighing methods. If such tests show that the weighing system is out of
tolerance (as established by the applicable standards), SELLER shall take
appropriate steps to adjust the weighing system to an accurate condition. In the
event that the Parties are unable to agree upon such tests and adjustments to
the weighing system and weighing methods, then a qualified third party, mutually
chosen by the Parties, shall test and

                                      -25-
<PAGE>

adjust the weighing system and weighing methods to a condition of accuracy: and
the Parties shall bear equally the cost of such testing and adjustment.

            (e) If the tests conducted pursuant to Section 8.1(d) show that
SELLER's weighing system is out of tolerance (as established by the applicable
standards), PURCHASER shall make an appropriate adjustment to the affected
weights and related invoices and payments. Such adjustment shall be made (i)
retroactively to a date midway between the date on which the weighing system was
last certified and the date on which the accuracy of weights related to the
out-of-tolerance condition was first questioned and (ii) prospectively until the
date on which the out-of-tolerance condition is corrected.

        8.2 COLLECTION AND PREPARATION OF SAMPLES

            (a) Unless the Parties otherwise agree, SELLER shall collect a
sample of each Shipment under this Agreement as the Shipment is loaded and shall
bear all costs related to obtaining an acceptable sample of the Shipment.
PURCHASER shall have the option, which may be exercised at any time during the
term of this Agreement, to obtain samples of Shipments, for governing purposes
and at PURCHASER's expense, at the destination plant or such other point as is
specified by PURCHASER.

            (b) At each of SELLER's Loading Facilities. SELLER shall provide a
mechanical sampling system and shall use the sampling system to collect a
representative sample of each Shipment. The following provisions shall apply to
each sampling system used by SELLER to collect samples of Shipments under this
Agreement:

                    (1) The design and operation of the sampling system and the
procedures used for sample preparation shall meet the requirements of ASTM
D-2234 "Standard Practice for Collection of a Gross Sample of Coal" and ASTM
D-2013 "Standard Method of Preparing Coal Samples for Analysis." The sampling
system shall be enclosed to minimize moisture loss and shall be designed for one
stage of sample crushing to the No. 8 sieve size (as determined by PURCHASER
based on ASTM D-4749 "Standard Test Method for Performing the Sieve Analysis of
Coal and Designating Coal Size"). The sample flow rates through the sampling
system shall be sufficient to minimize moisture loss. The Parties shall use
their best efforts to agree on modification of procedures and equipment to meet
future revisions of ASTM D-2234 and ASTM D-2013.

                    (2) All sample increments collected at all stages of
sampling in the sampling system shall cut the full stream of coal presented.
Upon PURCHASER's, request. SELLER shall make available to PURCHASER the values
of current measurements of sampling system cutter openings, cutter velocities,
and sample flow rates, which shall be subject to PURCHASER's review and
acceptance.

                    (3) SELLER shall monitor the sampling ratio of the sampling
system in a manner that is acceptable to PURCHASER and. upon PURCHASER's
request, shall make sampling ratio data available to PURCHASER.

                    (4) Using bias test procedures approved by PURCHASER, SELLER
shall cause the sampling system to be tested periodically (typically every two
years), at PURCHASER's request and at SELLER's expense, for bias against
stopped-belt reference samples. Such testing shall be scheduled such that when
each Shipment is sarnpled, the most recent bias test results are dated by no
more than two previous years. SELLER shall give PURCHASER written notice of the
scheduled date of each bias test; and PURCHASER or its representative may be

                                      -26-
<PAGE>

present during such test and may observe and inspect sample collection, sample
preparation, and laboratory analysis of bias test samples. If a bias is detected
by the test, SELLER shall immediately take all reasonable measures to correct or
remove the source of the bias; and PURCHASER may suspend Shipments under this
Agreement until (i) the source of the bias is removed and (ii) the sampling
system is re-tested for bias.

                    (5) Prior to the installation of any new sampling system at
any of SELLER's Loading Facilities or a modification of an existing sampling
system at any of SELLER's Loading Facilities, SELLER shall submit design
drawings, specifications, and sample extraction parameters for the new or
modified sampling system to PURCHASER for its approval, which shall not be
unreasonably withheld.

            (c) Using an enclosed riffle and following the procedures of ASTM
D-2013 with respect to each Shipment. SELLER shall divide the final sample of
No. 8 sieve size into at least four laboratory sample splits, with each split
weighing a minimum of 1.000 grams. SELLER shall promptly send one laboratory
sample to PURCHASER's designated laboratory and shall promptly analyze one
laboratory sample to provide the "as loaded" coal quality analysis as required
by Section 9.4. SELLER shall retain the two remaining laboratory samples as
reserve samples for at least thirty days after the date of the Shipment.

            (d) PURCHASER or its representative may observe any sampling or
sample preparation performed by SELLER; and SELLER may observe any sampling or
sample preparation performed by PURCHASER's designated laboratory.

            (e) In the event that SELLER's sampling system ceases to operate
properly, then SELLER shall immediately notify PURCHASER or its representative,
orally or in writing, to determine the course of action to be taken concerning
subsequent Shipments under this Agreement. If the sampling system malfunctions
during the loading of any Shipment. PURCHASER may, at its option, use a weighted
average analysis of the last two Shipments loaded prior to such malfunction to
determine the analysis of the Shipment being loaded at the time of such
malfunction. If the sampling system ceases to operate in accordance with the
requirements of this Agreement, PURCHASER's representative may direct SELLER to
delay or stop the loading of any one or more Shipments under this Agreement.
After any such direction is given, the following provisions shall apply:

                    (1) SELLER shall immediately delay or stop, as the case may
be, the loading of such Shipment(s); and SELLER shall pay all charges and costs
incurred by PURCHASER as a result of such delay or stoppage in the loading of
such Shipment(s).

                    (2) SELLER shall repair the sampling system as soon as
practical, and Shipments under this Agreement shall not resume until such repair
is completed.

        8.3 ANALYSIS OF SAMPLES

            (a) PURCHASER, at its expense, shall analyze the laboratory samples
sent to PURCHASER's designated laboratory in accordance with the procedures set
forth in Annex G, which is attached hereto and made a part of this Agreement;
and the results of such analyses shall be used for the governing purposes of
this Agreement. Annex G delineates laboratory sample preparation and analytical
procedures that are in accordance with ASTM and industry standards and shall be
used by the Parties as provided in this Agreement. PURCHASER shall mail a copy
of each such analysis to SALES AGENT within three working days after the sample
is received at the designated

                                      -27-
<PAGE>

laboratory, which may be PURCHASER's Central Laboratory in Smyrna, Georgia. or
an independent coal-testing laboratory selected by PURCHASER. If PURCHASER
elects to employ an independent coal-testing laboratory, SELLER shall not be
liable for any costs incurred by PURCHASER except as otherwise provided in this
Agreement.

            (b) SELLER or its representative may observe any sample preparation
or sample analysis performed at PURCHASER's designated laboratory.

            (c) If SELLER disputes the results of PURCHASER's analysis of any
Shipment. SELLER shall give PURCHASER written notice thereof within thirty days
after SELLER has received the Shipment's analysis from PURCHASER. Promptly after
giving such notice. SELLER shall send one of the reserve samples of the Shipment
to a qualified independent laboratory (selected jointly by the Parties), which
shall conduct a referee analysis of such reserve sample in accordance with Annex
G. The Parties shall bear equally the cost of any such analysis. With respect to
a dispute over the calorific value analysis, PURCHASER's analysis shall be
deemed to have been confirmed, and no further adjustment in billing calculations
shall be made, if the dry basis calorific value analysis by such independent
laboratory differs from PURCHASER's analysis by no more than 100 Btu/lb. With
respect to disputes over other items of analysis, PURCH,ASER's analysis shall be
deemed to have been confirmed. and no further adjustment in billing calculations
shall be made, if the analysis by such independent laboratory and the analysis
by PURCHASER's designated laboratory are within the tolerances specified in the
then-current ASTM standards.

SECTION 9: ARRANGEMENTS FOR SHIPMENTS AND PAYMENTS

        9.1 SCHEDULING OF SHIPMENTS. The Parties anticipate that all Shipments
under this Agreement shall be transported by rail from SELLER's Loading Facility
to one or more of electric-generating plants designated by PURCHASER, which may
include plants owned or operated by PURCHASER or plants owned or operated by
other parties. Prior to the first day of each calendar month during the term of
this Agreement, the Parties shall establish a loading schedule for all Shipments
to be made during such month. Such schedule shall include, without limitation,
loading dates and loading facilities as loading points for such Shipments and
shall be established by the Parties' respective transportation coordinators in
accordance with the quantity requirements set forth in Section 6.

        9.2 LOADING OF SHIPMENTS

            (a) SELLER shall provide rail trackage sufficient for efficient and
dependable loading of unit trains at each of SELLER's Loading Facilities and
shall be prepared to operate such loading facility 24 hours per day, seven days
per week and in compliance with the Rail Contract. (A summary of the relevant
provisions of the Rail Contract in effect as of the date of the execution of
this Agreement is attached hereto as Annex H and made a part of this Agreement.)

            (b) SELLER shall load all Shipments under this Agreement in
accordance with the Rail Contract in effect on January l, 2004, or as thereafter
amended, supplemented, or replaced. Notwithstanding any other provision of this
Agreement, if the Rail Contract, as amended. supplemented, or replaced, imposes
loading terms, conditions, or duties on SELLER that are more onerous than those
set forth in Section 9.2(a), PURCHASER shall reimburse SELLER for additional
costs incurred by SELLER to perform such more onerous loading terms, conditions,

                                      -28-
<PAGE>

or duties within thirty days after PURCHASER has received from SELLER a written
statement itemizing such costs (which may include SELLER's additional costs for
labor, materials, or amortization of capital items or a combination of such
costs) and providing information necessary to enable PURCHASER to verify such
costs.

            (c) SELLER shall provide loading facilities capable of loading unit
trains at an effective rate of 10,000 tons in a four-hour loading period and
shall load railcars in a timely manner that coincides with the loading times
specified in the Rail Contract. SELLER agrees that no existing or future
agreement between SELLER and any other party concerning the joint use of surface
facilities shall interfere with or impair SELLER's obligations under this
Agreement.

            (d) SELLER shall use reasonable efforts (i) to optimize the usage of
railcars provided by PURCHASER for transporting Shipments under this Agreement
and (ii) to ensure that any extraneous material, foreign substances, or debris
is removed from each railcar prior to loading.

        9.3 SHIPPING NOTICES

            (a) Promptly after loading each Shipment, SELLER shall prepare a
shipping notice (in the form of a 404 Bill of Lading) for the Shipment. SELLER
shall deliver one copy of such notice to the rail carrier prior to the time the
railcars containing such Shipment depart from SELLER's Loading Facility, shall
retain one copy of such notice for SELLER's records, shall transmit one copy of
such notice electronically to PURCHASER, and shall transmit one copy by fax to
each of the following:

                (1) Southern Company Services. Inc.
                    Fuel Services Department
                    Atlanta. Georgia
                    Fax: 404-506-6948

                (2) Southern Company Services, Inc.
                    Fuel Services Department
                    Birmingham, Alabama
                    Fax: 205-257-7288

                (3) Plant Fuel Handling (as designated by PURCHASER in the
                    applicable purchase order)

            (b) With respect to each Shipment. SELLER shall utilize Automatic
Equipment Identification ("AEI") to correctly identify and list all railcars in
a computer system during the loading process. The weight for each railcar or
total train weight shall be automatically entered into the computer system if
mine weights govern. Upon completion of loading and prior to the train's
depanure from the loading facility. SELLER shall cause the 404 Bill of Lading to
be transmitted to the rail carrier and then to PURCHASER via a computerized
Electronic Data Interchange ("EDI").

            (c) The 404 Bill of Lading shall provide the following information:
carrier name, SELLER's name, loading facility name and FSAC number, PURCHASER's
purchase order number, destination, amount of tons in the Shipment, number of
railcars (with quantity of steel and aluminum cars separately stated),
transportation contract number, SES train number, train arrival date/time,
loading start date/time, loading finish date/time, total loading time, date/time
of bill of lading release to rail carrier, and total train consist (including
report marks and railcar numbers).

        9.4 "AS LOADED" COAL QUALITY ANALYSIS. In addition to the shipping
notice required under Section 9.3, SELLER shall prepare an "as loaded" coal
quality analysis of each Shipment and shall transmit such analysis by fax to
PURCHASER, at the locations specified in Section 93(a), prior to the Shipment's
arrival at the destination plant. PURCHASER shall not be obligated to unload any
Shipment until PURCHASER has received the shipping notice

                                      -29-
<PAGE>

required under Section 9.3 and the "as loaded" coal quality analysis required
under this Section 9.4 with respect to the Shipment, and SELLER shall reimburse
PURCHASER for any demurrage or expenses incurred as a result of SELLER's failure
to provide such notice and such analysis to PURCHASER.

        9.5 FREIGHT CHARGES, RISK OF LOSS, AND PASSAGE OF TITLE. Subject to the
provisions of Sections 9.6 and 9.7, PURCHASER shall pay all freight and other
charges imposed by the Rail Contract and shall bear the risk of loss of or
damage to each Shipment after it has been properly loaded into railcars; but
title to each Shipment shall not pass to PURCHASER until the Shipment has
arrived at the destination plant designated by PURCHASER. Notwithstanding the
foregoing provisions of this Section 9.5, SELLER shall bear all expenses and
costs associated with the delivery of coal to, and the loading of coal into
railcars at, SELLER's Loading Facilities and shall indemnify PURCHASER against
all claims. demands, actions, suits, liabilities, and judgments related to such
delivery and loading of coal under this Agreement.

        9.6 LOADING COSTS CHARGEABLE TO SELLER. If SELLER fails to satisfy the
loading requirements of the Rail Contract and such failure is not excused
pursuant to the force majeure provisions of the Rail Contract, SELLER shall pay
PURCHASER any resulting car-detention charges, demurrage, or other charges for
railcars loaded in excess of capacity that are imposed on PURCHASER under the
Rail Contract. SELLER shall also pay the per-ton transportation rate, as
specified in the Rail Contract, for all tons not loaded to the minimum loading
capacity per railcar. SELLER shall conform to the rail carriers restrictions
relating to maximum allowable gross railcar weights. If railcars are found to be
overloaded, SELLER shall be responsible for any associated costs for reducing
the weight of railcars to comply with the rail carrier's restrictions and shall
be obligated to provide PURCHASER with corrected governing weight documentation.
Notwithstanding anything to the contrary in Section 9.5, SELLER shall be
responsible for any damage resulting from overloaded railcars.

        9.7 EXCESS FREIGHT COSTS CHARGEABLE TO SELLER. If (i) SELLER fails to
tender sufficient coal to satisfy the quantity requirements set forth in Section
6. and thereby causes non-compliance with the tonnage requirements of the Rail
Contract, and (ii) such failure is not excused pursuant to the force majeure
provisions of this Agreement or the Rail Contract, SELLER shall pay PURCHASER
any resulting freight charges that PURCHASER is required to pay the rail carrier
over the amount of such charges otherwise payable.

        9.8 PAYMENT OF AMOUNT(S) OWED TO PURCHASER. SELLER shall remit to
PURCHASER any payment that is required under Section 7.2, 7.3(a), 7.4(b),
7.4(d), 7.6, 8.1(b)(4), 8.2(e), 9.4, 9.6, or 9.7 within fourteen days after
SELLER has received from PURCHASER a written statement concerning the amount(s)
owed. If SELLER fails to pay such amount(s) within such fourteen-day period,
PURCHASER may immediately set off such amount(s) against, and deduct such
amount(s) from, one or more payments due from PURCHASER to SELLER or SALES AGENT
under this Agreement. PURCHASER may retain all sums deducted from such payments
pursuant to this Section 9.8 as satisfaction of the amount(s) owed by SELLER to
PURCHASER under Section 7.2, 7.3(a), 7.4(b), 7.4(d), 7.6, 8.1(b)(4), 8.2(e),
9.4, 9.6, or 9.7, as the case may be, and may recover any remaining amounts from
SELLER as provided by law.

        9.9 INVOICES AND INTERIM PAYMENTS. For each Shipment, PURCHASER shall
use a copy of the shipping notice transmitted by SELLER pursuant to Section 9.3
to prepare an invoice for the Shipment. In connection with

                                      -30-
<PAGE>

the processing of and payment for Shipments under each purchase order issued by
PURCHASER with respect to this Agreement, PURCHASER shall make interim payments
to SALES AGENT for each Shipment at the then-current Billing Price stated in
such purchase order(s) * * *13. The address to which such payments shall be
remitted shall be specified in such purchase order(s).

        9.10 APPLICATION OF ADJUSTMENTS TO BILLING PRICE. After preparing each
report concerning adjustments as provided in Section 4.8, PURCHASER shall adjust
the interim payment(s) previously remitted to SALES AGENT for Shipments during
the calendar month or Contract Year involved. If such adjustment results in an
underpayment by PURCHASER. PURCHASER shall remit the difference between (i) the
amount that should have been paid for such Shipments and (ii) the amount of such
interim payment(s). If such adjustment results in an overpayment by PURCHASER.
PURCHASER shall deduct the amount of the overpayment from any sum owed by
PURCHASER to SELLER or SALES AGENT under this Agreement.

        9.11 ACCEPTANCE OF PAYMENTS. PURCHASER's payment for each Shipment shall
be complete when appropriate adjustments with respect to the Shipment have been
made as provided in Sections 4.8 and 9.10 and have been applied to SELLER's
account: provided, however, that such payment shall be subject to later
adjustment pursuant to Sections 8.1(e), 8.3(c), and 15.1. SELLER's acceptance of
the amounts paid by PURCHASER for the Shipment shall constitute full and final
settlement of any and all claims by SELLER for costs and expenses (including,
without limitation. taxes. fees. Governmental Impositions. assessments.
premiums, and penalties) incurred or paid by SELLER, either while this Agreement
is in effect or at any time in the future. with respect to the mining,
processing, production, or sale of coal under this Agreement. SELLER shall
indemnify PURCHASER against. and hold PURCHASER harmless with respect to, any
claim or liability related to such costs and expenses. The provisions of this
Section 9.11 shall survive the termination or expiration of this Agreement.

SECTION 10: TERMINATION FOR UNREMEDIED DEFAULT

        10.1 NOTICE OF TERMINATION. In the event that a Party defaults in
performing one or more of its obligations under this Agreement ("Defaulting
Party"), then the Party not in default ("Non-Defaulting Party") may notify the
Defaulting Party, in writing, that the Non-Defaulting Party intends to terminate
this Agreement. The notice shall specify the default and the proposed effective
date of termination. If the Defaulting Party fails to cure such default within
120 days after the date of the notice, the Non-Defaulting Party may terminate
this Agreement immediately by giving the Defaulting Panty written notice
thereof. which shall specify the effective date of termination. The provisions
of this Section 10.1 shall not apply to a termination under any other provision
of this Agreement.

        10.2 OPTION TO FOREGO TERMINATION. In addition to and not as a
limitation upon the Non-Defaulting Party's other rights under this Agreement,
the Non-Defaulting Party), may elect to forego its right to terminate this
Agreement pursuant to Section 10.1 and may require the Defaulting Party to
perform its obligations under this Agreement.

SECTION 11: EXCUSE FROM PERFORMANCE

        11.1 FORCE MAJEURE


-------
  13    Confidential material redacted and filed separately with the Commission.


                                      -31-
<PAGE>

            (a) "SELLER's Force Majeure," as used herein, means a cause
reasonably beyond the control of SELLER whether foreseen or unforeseen that,
wholly or in substantial part, directly or indirectly prevents or restricts the
mining, processing, loading, or delivery of SELLER's coal. "PURCHASER's Force
Majeure," as used herein, means a cause reasonably beyond the control of
PURCHASER whether foreseen or unforeseen that, wholly or in substantial pan,
directly or indirectly prevents or restricts the delivery, unloading, storing.
or burning of SELLER's coal at the destination plant. Examples (without
limitation) of force majeure are the following: acts of God: acts of the public
enemy: insurrections: riots; strikes; labor disputes; work stoppages; fires:
explosions: floods: adverse geological conditions that substantially impair
production of coal: electric power failures; breakdowns of or damage to
generating or preparation plants; interruptions to or contingencies of
transportation (including, without limitation, force majeure as defined in the
Rail Contract); embargoes; and orders or acts of civil or military authority
(including, without limitation, a city or county ordinance, an act of a state
legislature, or an act of the United States Congress); provided, however, that
for purposes of this Agreement, force majeure shall not include, and no Party
shall be excused from performance because of, (i) the development or existence
of economic conditions that may adversely affect the anticipated profitability
of a Party's activities under this Agreement, (ii) acts or omissions of a Party
that constitute mismanagement or fraud on the pan of such Party, or (iii)
reduced productivity of labor employed by a Party), in its activities under this
Agreement.

            (b) If, because of PURCHASER's Force Majeure, PURCHASER is unable to
carry out its obligations under this Agreement and if PURCHASER gives SELLER
written notice of such force majeure, the obligations of PURCHASER and the
corresponding obligations of SELLER shall be suspended to the extent made
necessary by and during the continuance of such force majeure; provided,
however, that the disabling effects of such force majeure shall be eliminated as
soon as and to the extent possible (except that PURCHASER, in its sole
discretion, may settle any of its own labor disputes or strikes or terminate any
of its own lockouts).

            (c) If because of SELLER's Force Majeure, SELLER is unable to carry
out its obligations under this Agreement and if SELLER gives PURCHASER written
notice of such force majeure, the obligations of SELLER and the corresponding
obligations of PURCHASER shall be suspended to the extent made necessary by and
during the continuance of such force majeure; provided, however, that the
disabling effects of such force majeure shall be eliminated as soon as and to
the extent possible (except that SELLER, in its sole discretion, may settle any
of its own labor disputes or strikes or terminate any of its own lockouts).

            (d) After an event of force majeure has ended, the Parties shall
mutually determine whether to make up any Tonnage Shortfall that is caused by
such event. If the Parties elect to make up the Tonnage Shortfall. the Parties
shall agree to a schedule that shall allow the Tonnage Shortfall to be supplied
within a twelve-month period after the end of such event; and the term of this
Agreement may be extended to accommodate such schedule. The price for any such
makeup tons shall be determined according to the Billing Price that was in
effect during the force majeure event(s) related to the Tonnage Shortfall.

            (e) Notwithstanding the other provisions of Section 11.1, no cause
shall excuse SELLER from performing its obligations under Sections 9.6 and 9.7
unless the cause is one that is an event of force majeure under

                                      -32-
<PAGE>

the provisions of the Rail Contract. The Parties acknowledge and agree that for
the purposes of Sections 9.6 and 9.7. the construction, interpretation, and
application of the force majeure provisions of the Rail Contract by the
responsible official of the rail carrier shall be binding upon the Parties,
subject to any administrative or judicial challenge by SELLER, at its expense,
with PURCHASER's cooperation.

            (f) The Parties acknowledge and agree that if any valid law,
ordinance, or regulation of a municipality, county, state, or United States
government or any final judicial decision, judgment. or order is adopted,
passed. or issued after January l, 2004. that either (i) directly prohibits the
mining, processing, or loading of coal as contemplated under this Agreement or
(ii) directly prohibits the burning or use of such coal at the destination
plant, then the existence and implementation of such law, ordinance, regulation,
decision, judgment, or order shall constitute an event of permanent force
majeure; and the Party so affected may then terminate this Agreement by giving
the other Party written notice thereof, which shall specify the effective date
of termination.

            (g) Notwithstanding the other provisions of Section 11.1, a Party
not claiming force majeure may terminate this Agreement whenever all of the
following circumstances exist: (i) a condition of force majeure occurs that
causes the Parties' mutual obligations to be suspended with respect to the total
quantity of coal to be supplied under this Agreement; (ii) such condition, alone
or extended by other conditions of force majeure, continues so that the Parties'
mutual obligations remain suspended for a period of six consecutive months; and
(iii) at the end of such six-month period or at any time thereafter during the
continuance of such condition, the Party not claiming force majeure concludes,
in its reasonable judgment, that there is little likelihood of ending the
condition(s) in the immediate future. The Party not claiming force majeure may
exercise such right of termination by giving the other Party written notice
thereof, which shall specify the effective date of termination and shall be
given at least ninety days prior to such date.

       11.2 CHANGES IN ENVIRONMENTAL-RELATED REQUIREMENTS

            (a) The term "Environmental-Related Requirement," whether in the
singular or the plural, means the following:

                (1) any environmentally related prohibition, restriction, or
                    limitation regarding the burning of coal at one or more of
                    the destination plants;
                (2) any prohibition, restriction, or limitation regarding (i)
                    the quality of coal that PURCHASER may burn (including,
                    without limitation, any constituent specification) at one or
                    more of the destination plants or (ii) the type or amount of
                    emissions from such plant(s);
                (3) any rule or requirement affecting the permissible means for
                    complying with any such prohibition, restriction, or
                    limitation; or
                (4) any imposition of a cost, fee, tax, or other economic burden
                    on PURCHASER related to (i) the production of electricity
                    (either generally or by means of coal-fired electric
                    generation), (ii) the quantity of coal purchased or burned
                    by PURCHASER at one or more of the destination plants, (iii)
                    any constituent specification of coal purchased or burned by
                    PURCHASER at such plant(s), (iv) the type or amount of
                    emissions from such plant(s), or (v) the installation of any
                    type of environmental-related equipment required by any
                    regulatory authority to which PURCHASER is subject.

In addition, the term shall be deemed to include PURCHASER's strategy, as
determined by PURCHASER in its reasonable judgment, for compliance with
Environmental-Related Requirements.

            (b) A change in Environmental-Related Requirements shall be deemed
to have occurred in any one or more of the following circumstances: (1) there is
any increase or decrease in existing Environmental-Related

                                      -33-
<PAGE>

Requirements, (ii) PURCHASER decides, in its reasonable judgment, to change its
strategy for compliance with any existing Environmental-Related Requirements; or
(iii) a new Environmental-Related Requirement is imposed on PURCHASER as a
result of any federal or state law, administrative regulation or ruling, local
ordinance. court order or decision, or any revision in the interpretation or
implementation of such law, regulation, ruling, ordinance, order, or decision.
The Parties acknowledge and agree that a change in Environmental-Related
Requirements may occur even though (i) such requirement is stated as a
restriction, limitation. or obligation imposed on PURCHASER and its affiliates
or some other group of utilities or (ii) such requirement affects PURCHASER in a
general way and is not directed at specific plants, fuels, fuel supplies, or
other operating conditions.

            (c) The Parties acknowledge and agree that the provisions of Section
11.2 are intended to provide rights in addition to the rights provided in
Section 11.1 and that the price, specifications, quantity, and destination(s) of
coal to be supplied under this Agreement are predicated on Environmental-Related
Requirements that were known and in effect as of January l, 2004. For purposes
of this Section 11.2(c), an Environmental-Related Requirement shall not be
deemed to be "known" if it relates to any federal or state law, administrative
regulation or ruling, local ordinance. or court order or decision or
interpretation of such law, regulation, ruling, ordinance, order, or decision
(collectively, "Legal Requirements") that was being challenged in any
administrative or judicial proceeding ("Legal Proceeding") as of January 1,
2004. Upon the final resolution of the Legal Proceeding (including any appeals
related to the Legal Proceeding), PURCHASER shall determine, in its reasonable
judgment, if the Legal Requirements (whether changed or unchanged as a result of
the Legal Proceeding) constitute a change in Environmental-Related Requirements.

            (d) In the event that a change in Environmental-Related Requirements
occurs after January 1, 2004. then PURCHASER shall determine, in its reasonable
judgment, (i) how to comply with such change and (ii) whether such change has
had or may have an adverse impact on PURCHASER's use of coal to be supplied
under this Agreement at one or more of the destination plants. Any change in
Environmental Related Requirements that has one or more of the following effects
shall be deemed to have an adverse impact on PURCHASER's use of coal to be
supplied under this Agreement at such plant(s), even though such requirements
may allow PURCHASER a choice of options for complying with such requirement
(which choice may include, for example, the payment of a fee or tax in lieu of
the installation of equipment, the use of coal of different constituent
specifications. or the reduction in the overall use of coal at such plant(s)):

                (1) the change imposes a cost, fee, tax, or other economic
                    burden on PURCHASER concerning (i) the constituent
                    specifications of coal purchased for or burned at such
                    plant(s) or (ii) the type or amount of emissions from such
                    plant(s);

                (2) the change directly prevents or restricts PURCHASER from
                    using coal to be supplied under this Agreement at such
                    plant(s);

                (3) the change requires PURCHASER to install equipment
                    (including, without limitation. flue gas desulfurization
                    equipment. selective catalytic reduction equipment,
                    selective non-catalytic reduction equipment, equipment for
                    co-firing with natural gas, or particulate removal
                    equipment) at such plant(s) in order to comply with such
                    change; or

                (4) the change requires or permits PURCHASER to use coal of a
                    quality (including, without limitation, sulfur) different
                    from the specifications set forth in Section 7.1.

                                      -34-
<PAGE>

            (e) If PURCHASER determines that a change in Environmental-Related
Requirements has had or may have, at a future date, an adverse impact on the use
of coal to be supplied under this Agreement, PURCHASER shall so notify SELLER in
writing. Upon receipt of such notice, SELLER shall have the option to propose,
within thirty days after receipt of such notice, any steps available to SELLER
in its mining and processing of the coal, in the supply of substitute coal, or
other measure that would result in as low a delivered cost of fuel at the
destination plant(s) as PURCHASER could obtain by purchasing reasonably
available substitute fuel, taking into consideration any fees, taxes, costs, or
other economic burdens imposed on the use of coal at such plant(s). In the event
that PURCHASER determines, in its reasonable judgment, that SELLER cannot
achieve this result, then PURCHASER may terminate this Agreement by giving
SELLER written notice thereof, which shall specify the effective date of
termination and shall be given at least ninety days prior to such date.
PURCHASER may give such notice either before or after a change in
Environmental-Related Requirements becomes effective.

            (f) If, at any time (luring the term of this Agreement and
regardless of whether a change in Environmental-Related Requirements has
occurred. PURCHASER determines, in its reasonable judgment, that any operational
or environmental compliance problem at one or more of the destination plants has
resulted from the components or characteristics of SELLER's coal or the products
of its combustion (including, without limitation, nitrogen oxide emissions,
mercury emissions, chlorine emissions, particulate emissions. and carbon
emissions) or any other constituent or property of the coal not otherwise
specified herein, the Parties shall immediately enter into discussions in a
good-faith effort to resolve the problem. If such discussions fail to resolve
such problem in a manner that, in PURCHASER's judgment, is reasonable and would
not impose an unreasonable additional expense on PURCHASER, then PURCHASER may
terminate this Agreement by giving SELLER written notice thereof, which shall
specify the effective date of termination and shall be given at least ninety
days prior to such date. No expense contemplated by this Section 11.2(f) or any
other provision of Section 11.2 shall be deemed reasonable if it would result in
a delivered cost of coal under this Agreement that exceeds the delivered cost of
competitive fuels or sources then available to PURCHASER.

SECTION 12: INDEPENDENT CONTRACTOR

        The Parties acknowledge and agree that this Agreement is a contract for
the sale and purchase of coal, that the relationship between PURCHASER, on the
one hand, and SELLER and SALES AGENT, on the other hand, is an independent
contractor relationship, and that neither this Agreement nor the purchase and
sale of coal under this Agreement shall create a partnership, joint venture,
joint enterprise, or agency relationship. The Parties further acknowledge and
agree that neither SELLER nor SALES AGENT is an agent or employee of PURCHASER
and that SELLER and SALES AGENT are independent of any managerial or other
control or direction by PURCHASER and are free to perform, by such means and in
such manner as SELLER and SALES AGENT may choose. all work in pursuance of their
commitments under this Agreement

SECTION 13: EFFECT OF CERTAIN TERMINATIONS

        A termination of this Agreement pursuant to Section 2.5(c), 4.3(f),
7.1(d), 11.1(f), 11.1(g), 11.2(e), or 11.2(f) shall not be construed as, or
deemed to be, a default or breach under this Agreement; and upon such
termination, no Party shall have any further obligations or liability under this
Agreement, except with respect to (i)

                                      -35-
<PAGE>

Shipments made prior to the effective date of such termination or (ii) other
obligations or liability that may have accrued prior to the effective date of
such termination.

SECTION 14: BINDING EFFECT AND ASSIGNMENTS

        14.1 BINDING EFFECT. This Agreement shall bind, and inure to the benefit
of, the Parties and their successors and assigns, as permitted under Section
14.2.

        14.2 ASSIGNMENTS

            (a) A Party may not assign its rights, duties, obligations, or
interests under and in this Agreement without the non-assigning Party's prior
written consent, which shall not be unreasonably withheld. Any purported
assignment without such consent shall be null and void. Such restrictions shall
also apply to any successor of a Party.

            (b) Notwithstanding the provisions of Section 14.2(a), SELLER may
assign its rights, duties, obligations, and interests under and in this
Agreement to a parent, subsidiary. affiliate, or sister corporation: provided,
however, that SELLER shall not be thereby relieved of its duties or obligations
under this Agreement. SELLER may also assign monies due or to become due under
this Agreement in connection with any financing transactions. In addition.
PURCHASER may assign its rights, duties, obligations, and interests under and in
this Agreement to a subsidiary. affiliate, or sister corporation and may sell
any portion of the coal purchased under this Agreement to any other person or
entity; provided, however, that PURCHASER shall not be thereby relieved of its
duties or obligations under this Agreement.

            (c) Nothing in Section 14.2 shall be construed to limit or restrict
PURCHASER's right under Section 9.1 to direct Shipments to destinations other
than the destination plant without SELLER's consent and at no additional cost to
SELLER.

SECTION 15: PURCHASER'S RIGHTS OF INSPECTION

        15.1 ACCESS TO SELLER'S RECORDS. SELLER shall maintain accurate records
relating to Shipments under this Agreement in accordance with generally accepted
accounting principles and shall retain such records for at least three years
after this Agreement is terminated or expires. SELLER shall make such records
available to PURCHASER. its accountants, auditors, or other authorized
representatives, who shall be given access to and be permitted to examine such
records at reasonable times. If an audit determines that any payments previously
made this Agreement ("Previous Payments") were not properly calculated,
adjustments shall be made promptly in amounts to be paid in the future for
Shipments under this Agreement ("Future Payments") to reflect the proper amount
of such adjustments; or if no Future Payments are then due, payments shall be
promptly made to reflect the difference between the Previous Payments and -the
proper amounts determined by audit. The provisions of this Section 15.1 shall
survive the termination or expiration of this Agreement.

        15.2 Access to Coal Property. PURCHASER or its representative shall have
the right at all times during normal Coal Property operation to enter upon the
Coal Property or other appropriate locations, at PURCHASER's sole risk and
expense, for any of the following purposes: (a) to inspect and examine the
method and manner of mining, producing, washing, storing, loading, unloading,
transporting, sampling, weighing, analyzing, or handling of coal to be supplied
under this Agreement; (b) to take samples of coal for PURCHASER's analyses; or
(c) in

                                      -36-
<PAGE>

connection with any accounting, audit, or examination of SELLER's records. Prior
to entering the Coal Property, PURCHASER's representative shall check in with
appropriate personnel at the entrance to the Coal Property. No such inspection
by PURCHASER shall be deemed a waiver of any of PURCHASER's rights or relieve
SELLER of any obligations under this Agreement.

SECTION 16: WAIVER

        The waiver by a Party of any provision or condition of this Agreement
shall not be construed as. or deemed to be, a waiver of any other provision or
condition of this Agreement, nor a waiver of a subsequent breach of the same
provision or condition, unless such waiver is expressed in writing and signed by
the Parties. The failure of a Party to enforce, in one or more instances, any
right under this Agreement shall not be construed as, or deemed to be, a waiver
of such right in the future.

SECTION 17: REMEDIES

        All remedies provided under this Agreement shall be cumulative and in
addition to other remedies available at law or in equity.

SECTION 18: NOTICES

        Except for shipping notices (to be provided as required by Section 9.3)
and "as loaded" coal quality analyses (to be provided as required by Section
9.4) and except as otherwise provided in this Agreement, any notice, request,
demand, report, or statement (collectively, "Notice") given by one Party to
another Party concerning this Agreement shall be in writing and shall be sent by
overnight courier (in which case the Notice shall be deemed to have been
received on the next business day after it is sent) or by certified mail (in
which case the Notice shall be deemed to have been received on the third
business day after it is sent) to the appropriate addresses) listed in this
Section 18.

            (a) Each Notice to PURCHASER shall be sent to:

                Vice President
                Fuel Services 14N-8160
                Southern Company Services, Inc.
                P.O. Box 2641
                Birmingham, AL 35291-8160

                with a copy to:      Supervisor, Fuel Services Department
                                     Southern Company Services, Inc. Bin 10171
                                     241 Ralph McGill Boulevard. N.E.
                                     Atlanta, GA 30308-3374

                or to such other address as PURCHASER designates by a Notice to
                SALES AGENT.

            (b) Each Notice is to SELLER or SALES AGENT shall be sent to:

                James River Coal Sales. Inc.
                901 East Byrd Street
                Suite 1600
                Richmond, VA 23219-4080


                or to such other address as SALES AGENT designates by a Notice
                to PURCHASER.

SECTION 19: CONFIDENTIAL AND PROPRIETARY INFORMATION

        The terms and conditions (including, without limitation, prices) set
forth in this Agreement are considered by the Parties to be confidential and
proprietary information. No Party shall disclose any such information to any
third party without the other Parties' prior written consent, which shall not be
unreasonably withheld; provided,

                                      -37-
<PAGE>

however, that no such consent shall be needed where such disclosure (i) is
required by law, regulation, or regulatory agencies having jurisdiction over one
of the Parties or (ii) is necessary in connection with a Party's assertion of a
claim or defense in a judicial or administrative proceeding, and that in either
of these events, the Party intending to make such disclosure shall advise the
other Parties in advance and cooperate to the extent practicable to minimize the
disclosure of any such information. Notwithstanding the foregoing provisions of
this Section 19, a Party may disclose any information contained in this
Agreement to a prospective purchaser of the stock or assets of that Party;
provided, however, that any such prospective purchaser shall be bound by the
provisions of this Section 19. For purposes of this Section 19, the term "third
party" shall not include (i) a Party's parent, subsidiary, affiliate, or sister
corporation or (ii) the Parties' respective officers, directors, employees,
legal advisers, accountants, or consultants.

SECTION 20: COMPLIANCE WITH LAWS AND REGULATIONS

        In connection with its performance under this Agreement. SELLER shall
comply in all material respects with applicable laws and regulations (including.
without limitation, those set forth in Annex 1, which is attached hereto and
made a part of this Agreement.) SELLER shall acquire and maintain, in a timely
manner, all licenses and permits required by governmental authorities to enable
SELLER to perform its obligations under this Agreement.

SECTION 21: OTHER PROVISIONS

        21.1 CAPTIONS. The captions to sections of this Agreement are for
convenience only and shall not be considered in construing the intent of the
Parties.

        21.2 GOVERNING LAW. All questions concerning the execution,
construction, performance, breach, or enforcement of this Agreement shall be
governed by, and all provisions hereof shall be construed in accordance with,
the substantive laws of the State of Georgia without regard to the Georgia rules
concerning conflicts of law.

        21.3 TIME OF ESSENCE. Time is of the essence in the performance of this
Agreement.

        21.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Parties with respect to the subject matter hereof; and all prior
agreements, promises, representations, understandings, negotiations, and
communications, whether oral or in writing, among the Parties with respect to
the subject matter hereof are merged into and superseded by this Agreement.

        21.5 AMENDMENTS. No amendment, modification, or revision of the terms
and conditions of this Agreement shall be effective or binding on either Party
unless such amendment, modification, or revision is reduced to writing and
signed by an authorized representative of each Party.

        21.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original; but such counterparts shall
constitute one and the same instrument.


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                                      -38-
<PAGE>

        IN WITNESS WHEREOF, the Parties, intending to be bound hereby, have
caused this Agreement to be executed by their respective authorized officers as
of the date first above written.


Witness                                     GEORGIA POWER COMPANY


/s/ Carol Kelly                             By:  /s/ Christopher C. Womack
----------------------------                     -------------------------------

                                            Its: Senior Vice President
                                                 -------------------------------


Witness                                     JAMES RIVER COAL COMPANY


/s/ Mark Dooley                             By:  /s/ Peter T. Socha
----------------------------                     -------------------------------

                                            Its: CEO
                                                 -------------------------------


Witness                                     JAMES RIVER COAL SALES, INC.


/s/ Mark Dooley                             By:  /s/ William R. Beasley
----------------------------                     -------------------------------

                                            Its: President
                                                 -------------------------------